On December 28, 2012, EPA published a proposed rule that will make two key elements of the Wisconsin State Implementation Plan (SIP) consistent with the vast majority of other air permitting jurisdictions in the United States. First, the proposed rule would approve revisions to the SIP modifying the State’s prevention of significant deterioration (PSD) program to increase the significant emission thresholds for determining when a new or modified stationary source becomes subject to PSD permitting obligations because of greenhouse gas (GHG) emissions. Second, EPA has proposed approving Wisconsin rules that will defer until July 21, 2014 the application of PSD permitting requirements to the carbon dioxide (CO₂) emissions that are generated from bioenergy and biogenetic stationary sources. EPA will accept comments on its proposed approval of these rules until January 28, 2013.

Background

EPA’s proposed approval is an important milestone in a long and controversial effort by EPA to use the Clean Air Act to regulate GHG emissions. By way of background, EPA previously adopted four Clean Air Act rules in its effort to regulate GHGs emissions from stationary sources:

1. The "Endangerment Finding" rule in which EPA concluded that GHG emissions endanger public health and the environment for current and future generations. This was a necessary first step for EPA to use the Clean Air Act to regulate GHG emissions.

    

2. The "Cause or Contribute Finding" rule wherein EPA concluded that GHG emissions from certain mobile sources cause or contribute to the aforementioned endangerment. This finding allowed EPA to then craft emission standards to control GHG emissions from vehicles that were causing or contributing to endangering the environment.

    

3. The so-called "Johnson Memo Reconsideration" rule which memorialized an EPA interpretation that once GHG emissions become subject to an emission standard, GHG emissions also become pollutants "subject to regulation" under the Clean Air Act’s air permitting programs.

    

4. The "Light Duty Vehicle Rule" wherein EPA established GHG emission standards for new light duty vehicles. Under the aforementioned Johnson Memo Reconsideration rule, the creation of these GHG emission standards for vehicles acted as, a matter of law, to classify GHG emissions as pollutants subject to the Clean Air Act’s air permitting programs.

The net effect of these four rules was that, pursuant to the longstanding Clean Air Act permitting framework, stationary sources that emitted CO₂ and other GHG emissions above 100 tons per year (TPY) were arguably required to apply for Title V air permits. Likewise, new stationary sources emitting more than 250 TPY of GHG (100 TPY in some cases) or modifications to existing sources that significantly increased GHG emissions were required to obtain PSD permits.

Tailoring Rule

After finalizing the four rules described above, EPA quickly understood that the 100 and 250 TPY thresholds that are appropriate for other regulated air pollutants are simply not appropriate for CO₂. This is because CO₂emissions are so ubiquitous and are emitted in such great quantities that the 100 and 250 TPY thresholds would result in hundreds of thousands of new sources being subject to air permitting obligations under the Clean Air Act. In an effort to avoid this adverse impact on the economy and state regulatory agencies, EPA crafted the "Tailoring Rule" which increased the Title V and PSD permitting thresholds to 100,000 TPY which would ensure that the regulatory burden on GHG regulation would fall principally on larger industrial sources.

In response to these rulemaking efforts, each state, including Wisconsin, was obligated to craft rules establishing these alternative "Tailoring Rule" permitting thresholds for CO₂. WDNR crafted these rules and submitted them to EPA for approval. In the December 28, 2012 Federal Register, EPA has announces its intent to approve these rules for inclusion in Wisconsin SIP.

Biomass Deferral

Another unintended consequence of EPA’s decision to regulate GHGs under the Clean Air Act was the adverse impact on biogenic sources of CO₂ emissions, principally the combustion of biomass resources for energy generation. EPA’s GHG regulations did not distinguish between CO₂ generated from fossil fuel combustion or that from biomass. As a general matter, EPA believes that biomass combustion should be encouraged. Therefore on July 20, 2011 EPA promulgated a rule allowing states to defer the regulation of CO₂ emissions from bioenergy and other biogenic sources under the PSD and Title V permitting programs. This deferral is short lived, and for Wisconsin to take advantage it must be affirmatively implemented through the often lengthy and cumbersome state rulemaking efforts. WDNR promulgated a biomass deferral rule which was submitted to EPA for approval. In the December 28, 2012 Federal Register Notice, EPA is proposing to approve Wisconsin’s deferral rule but only as it impacts PSD permitting. EPA has not yet issued a decision on the biomass deferral for purposes of Title　V permitting requirements. If this deferral is ultimately approved by EPA, it is currently set to expire July 21, 2014.

SIP Gap

Importantly, until EPA issues its final approval of these two rules, there are concerns whether EPA or a federal court would recognize either state rule. Unless and until these rules are approved as part of the SIP, they are not generally viewed as federally enforceable. In 2011 EPA partially addressed this concern by revoking WDNR’s SIP authority to permit GHG emissions using Wisconsin rules, a move that resulted in the federal GHG permitting rules – with the 100,000 TPY threshold – taking effect in the state. However, this action did not directly affect Wisconsin sources that combust biomass or otherwise have biogenic emissions which may still be expected by federal courts and EPA officials to fully permit these GHG emissions until the EPA finalizes its approval of the Wisconsin biomass deferral rule.