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EPA Interpretation of Regulated Pollutant CO2 Under PSD Permit
Sarah S. Brehm
Jones Walker Environmental & Toxic Tort E*Lert
January 6, 2009

GLOBAL WARMING & CARBON DIOXIDE REGULATION

Environmental Protection Agency (“EPA”) Administrator Johnson issued an 18 page memorandum on December 18, 2008, detailing EPA’s position for climate control through carbon dioxide (CO2) emission limitations under the Prevention of Significant Deterioration (“PSD”) permitting program. The memo states that EPA does not consider a pollutant (including CO2) to be “subject to regulation” until the Agency has promulgated a regulation that requires emission controls. Carbon dioxide, therefore, is not subject to emission limitations before a PSD permit can be issued. What impact does this memorandum have on current global warming issues and litigation?

BRIEF CONCLUSION

In the short term, coal-fired power plants and other major sources of air pollutants are able to continue in the permitting process without having to address technological controls to limit CO2 emissions. Johnson’s memorandum clearly states that the EPA will not require the control or limitation of CO2 before a facility that emits a large amount of other air pollutants can begin construction or operation. It is unclear, however, how the Obama administration will address this issue. It is possible that the new EPA administrator will promulgate regulations limiting CO2 under the current statutory framework of the Clean Air Act (“CAA”) at the beginning of the administration. Another possibility is a change in the Agency’s position after a comment and review period.
 
For now, major emitters of air pollution do not need to address CO2 emissions.

ANALYSIS

The Basics of PSD Permits

Administrator Johnson’s announcement pertains to the PSD permitting program, which is a CAA permitting program for new and modified major sources of air pollution such as power plants, manufacturing facilities, and other facilities that emit air pollution. PSD applies to all pollutants that do not exceed (meet or are better than) the National Ambient Air Quality Standards (“NAAQS”) in an area. These are clean air areas. The NAAQS establishes maximum pollution concentration levels to protect public health and welfare from harmful levels of pollutants.1

A PSD permit is a legal document that limits the amount of air pollution that may be released by a large stationery source (i.e., a plant or facility). A PSD permit is required before a "major" new source constructs or before changes or modifications that are "major" or "significant" are made at an existing "major" source of air pollution. The permit may be issued by the EPA or the designated state permitting authority. The permit specifies what construction is allowed, what emission limits must be met, and often how the equipment that is causing the air pollution must be operated.2  

The program applies to a new plant that will have "major" and "significant" amounts of air pollution for any criteria pollutant. It also applies to an existing plant that plans to modify its operations such that the modification leads to increases of air pollution that will be "major" or "significant".3 

"Major" means emitting or having the potential to emit 100 tons per year (tpy) or more of any criteria pollutant (ozone, particulate matter, sulfur dioxide, etc.) for the specific source categories listed in the PSD regulations. There are 28 listed source categories, which include power plants that use steam to generate electricity, petroleum refineries, and glass fiber processing plants. If a plant does not fall into one of the listed source categories, then a larger threshold of 250 tpy applies, rather than the 100 tpy trigger.4 

The Legal Debate

EPA promulgated regulations that subject regulated pollutants to the PSD permit requirements, including the installation of the best available control technology (“BACT”) to reduce the quantity of pollutants that facility emits.

Environmental groups, like the Sierra Club are challenging PSD permits that do not include CO2 emission limitations, as CO2 is the largest greenhouse gas contributor. One Utah power plant PSD permit was recently challenged. The Environmental Appeals Board (“EAB”) released its decision in In re Deseret Power Electric Cooperative on November 13, 2008. The Sierra Club sought review of the PSD permit that the EPA issued to the Deseret Power company to construct a new waste-coal-fired power plant in Utah. Sierra Club argued that the permit violated the Clean Air Act, because it failed to apply the BACT to limit carbon dioxide emissions from the facility. The EAB held that the term regulated pollutant was ambiguous and remanded the case to the regional EPA office.

After the Deseret case, it became unclear whether CO2 was a regulated pollutant under the PSD regulations. Johnson’s memo addresses this uncertainty. He clearly states that CO2 is not a regulated pollutant until the EPA or Congress implements a statute or regulation actually limiting CO2 emissions.

CO2 is a Pollutant but not a Regulated Pollutant

In April 2007, the Supreme Court decision in Massachusetts v. EPA confirmed that carbon dioxide is a pollutant under the CAA, but the court did not compel the EPA to set air emission regulations for CO2. 549 U.S. 497 (2007). Current federal regulations require the monitoring and reporting of CO2, but there are no requirements to limit CO2 emissions. The Sierra Club argued that the Massachusetts v. EPA decision as well as the monitoring and reporting requirements meant CO2 is “subject to regulation” under the CAA for purposes of applying BACT to air permitting. The Deseret opinion held that this phrase was ambiguous and remanded the permit to the EPA to reconsider whether to impose a CO2 BACT limit.

The EPA’s administrator, Stephen Johnson, responded to the Deseret opinion with the December 18, 2008, initial interpretation of the EPA’s regulation:

The purpose of this memorandum is to build on the Board’s Deseret opinion and address ambiguity in EPA’s regulations that remains after the EAB concluded the Agency did not previously establish the interpretation that pollutants subject solely to monitoring or reporting requirements are not [regulated pollutants] that require emissions limitations based on levels that can be achieved using BACT.5

***

Thus, while the Deseret case decision was about whether a major stationary source obtaining a PSD permit based on its emissions of other pollutants was required to install BACT for an additional pollutant, it has created questions for hundreds of thousands of smaller sources that must determine whether they are “major sources” that must obtain PSD permits if they experience a major modification or construct a new facility.6

***

EPA interprets the definition of [regulated pollutant] in [the PSD permit regulations] to exclude pollutants for which EPA regulations only require monitoring or reporting but to include each pollutant subject to either a provision in the Clean Air Act or regulation promulgated by EPA under the Clean Air Act that requires actual control of emissions of that pollutant.7

In Deseret, the EAB rejected the Regional EPA’s argument that past interpretations required it to conclude monitoring was not enough to trigger the need for controls. The Board, however, also said that the EPA has the discretion to decide whether monitoring is enough to trigger control requirements through a new binding interpretation of what constitutes a “regulated pollutant.” In Johnson’s memo, the EPA attempts to create a better record in support of its interpretative ruling by citing a series of previous permitting decisions that are consistent with this approach. Johnson states that this interpretation allows the EPA to effectively implement the CAA by making PSD emissions limitations applicable when the agency promulgates a regulation restricting pollutant emissions based on a considered judgment by the Administrator or Congress that particular pollutants should be subject to control or limitation. “Requiring [PSD] limitations automatically for pollutant that are only subject to data gathering and study would frustrate EPA’s ability to accomplish several objectives of the Clean Air Act.”8

This interpretative memo has come under fire from environmental groups, including the Sierra Club. Over the past few years, the Sierra Club and other environmental organizations have sued to stop the construction of new coal-fired power plants and reduce the emissions of plants that are currently operating . According to the Sierra Club’s website, 28 coal-fired power plants were either defeated or abandoned in 2008, and the group plans to target proposals in Michigan, Texas, and Kansas in 2009.9 

The EPA’s interpretative memo, at least for the short term, keeps the permit process for new coal-fired power plants moving forward. The Obama administration will likely respond by promulgating CO2 emission-limiting regulations or instituting a revision of this interpretation after notice and public comments.

California Democrat Barbara Boxer, the chairwoman of the Senate Environment and Public Works Committee wrote a letter on December 22, 2008, asking the Justice Department to force the EPA to withdraw the “blatantly illegal memo.”10  She stated that “[t]his illegal document issued by Stephen Johnson makes it clear that he has become a renegade administrator… Mr. Johnson’s latest action is intended to make the job of combating global warming more difficult and will add to the millions of taxpayer dollars he has wasted in defending his illegal decisions.”

While Boxer attacks Johnson’s decision, a spokesman for Senator James Inhofe, a Republican from Oklahoma and a ranking member of the Environment and Public Works Committee, supported Johnson’s memo saying “[i]t represents sound policy judgment, is consistent with past agency practice, and not precluded by the Clean Air Act.”11

Meanwhile, the EPA has also issued an advanced notice of proposed rule-making that may serve as a road map to climate control in the future. 73 Fed. Reg. 44,354 (July 30, 2008). It addresses mobile and stationery sources of greenhouse gases, energy efficiency, alternative fuels, and economics, including cap and trade and options for existing CAA programs, including new source performance standards, hazardous air pollutants, PSD, and others. New legislation, however, is likely the most logical result.

The debate is far from over. Just last week, 15 nonprofit groups signed a petition to overturn the rule alleging that the EPA has gone beyond interpretation by effectively adopting new regulatory requirements with legal consequences—an act that requires notice and comment. They also ask Johnson to withdraw the memo entirely. EPA spokesman Jonathan Shradar said the EPA will respond “in a timely manner” to the petition, but notes it is unlikely that the agency can address it before the Obama administration takes over on January 20, 2009. Jeff Holmstead, who headed the EPA’s air office under George W. Bush and now works with the Electrical Liability Coordinating Council, noted that the technology to capture and store CO2 emissions from coal-fired plants is not yet available; therefore, plants already have the best available technology for those emissions, as required for a PSD permit.12

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1 http://www.epa.gov/region09/air/permit/psd-public-part.html

2 Id.

3 However, “significant” plant modifications can be less than these triggers for new plants, e.g., a net mission increase of 40 tpy of NOx will also trigger the PSD permit.

4 Id.

5 pg. 2, Stephen L. Johnson, Administrator EPA’s Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program (Dec. 18, 2008) (emphasis added).

6 Id. at 5.

7 Id. at 6.

8 Id. at 9.

9 http://action.sierraclub.org/site/R?i=2ZK_9j72CjUe3eaFElOtgQ

10 Letter from Barbara Boxer to Michael Mukasey, Dec. 22, 2008.

11 Robin Bravender, Boxer asks DOJ to force EPA withdrawal of 'blatantly illegal' emissions memo (12/22/2008), E&E News

12 Lisa Friedman and Jessica Leber, Litigation Looms Over CO2 Emissions Memo, Climate Wire, E&E News (1/5/09).