Despite the pending legal challenges and the many months of buildup and speculation about EPA's authority (or not) to regulate greenhouse gas emissions ("GHGs") under the existing Clean Air Act framework, the nation's first GHG permit requirements are in effect as of Monday, January 2, 2011. 

During the first phase of EPA’s “common sense approach” to regulating GHGs, the largest GHG emitters are now required to obtain permits for new or modified stationary sources.  Smaller GHG emitters will be phased-in to the permitting program through 2016. 

Because many states have delegated authority from EPA to implement Clean Air Act permit programs on a state-wide basis, it will be up to state agencies to determine the degree of emission controls required for GHGs. Just two months ago, in November 2010, EPA released a guidance document intended to assist states in making permit determinations for GHG emissions. The EPA guidance explains that new and modified affected facilities will be required to implement Best Available Control Technology (BACT) to control GHGs and comply with the Clean Air Act.

Although the BACT analysis has been used by EPA and state air permitting authorities for decades, the regulated community is left with considerable uncertainty as to the cost to comply, as BACT requires a case-by-case analysis and an agency determination as to what controls must be installed. A BACT determination is based on technological feasibility, environmental-effectiveness and cost-effectiveness of the control technology at the particular facility.

That said, pending legal challenges, new Republican leadership and potential backlash from state permitting authorities makes the future of GHG permitting requirements uncertain.  Although a number of petitions have been filed challenging EPA’s authority to regulate GHGs under the Clean Air Act, the D.C. Circuit of the U.S. Court of Appeals recently denied a motion to stay GHG permit requirements until litigation is resolved.  In other words, GHG permit requirements will remain in effect unless new federal legislation forces the issue or until the courts resolve the matter. 

Since December 2010, new Republican leadership has been very vocal about their intent to use federal legislation to curb EPA’s ability to regulate GHGs under the Clean Air Act.  However, it is unclear at this point how such legislation would be structured and if it could even pass in a divided Congress. 

Meanwhile, the State of Texas, who enjoys delegated Clean Air Act authority, has been the only state to refuse to adopt the new GHG permit requirements.  In December, EPA pledged to take over GHG permitting in Texas, but EPA has been temporarily stalled, as a Federal Court considers Texas’ arguments that EPA is overstepping its authority.

As the circus continues, businesses, investors and project developers are left with only the certainty that GHG permit requirements are in place today (except in Texas), and who knows about tomorrow or next month or next year.