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EPA Issues Guidance on PSD and Title V Permitting for Greenhouse Gas Emissions

By Stephen Fotis, Kyle Danish, Kaitlin Gregg

November 12, 2010 -- On November 10, 2010, the Environmental Protection Agency (EPA or the Agency) published a set of guidance documents to assist state permitting authorities and industry permitting applicants with the Clean Air Act "prevention of significant deterioration" (PSD) and title V permitting for sources of greenhouse gas emissions (GHGs).  Under EPA's previously finalized "Tailoring Rule," PSD and title V permitting for certain new and modified major GHG sources will begin on January 2, 2011.  Among other things, the guidance documents provide advice on PSD "best available control technology" (BACT) determinations for such sources. 

BACKGROUND
Under the Clean Air Act, major stationary sources that are either newly constructed or undergoing modifications that will cause a significant increase in emissions must obtain a preconstruction permit that, among other things, establishes an emissions limit based on "best available control technology" for every pollutant "subject to regulation" under the statute.  PSD permits are generally issued by state agencies or by in a few instances by the EPA.  The BACT standard is determined on a case-by-case basis.  Over time, however, EPA has developed and refined guidance which outlines a five-step, top-down process for making the BACT determinations.  

Title V of the Clean Air Act requires certain sources to obtain a permit that specifies all of the applicable Clean Air Act requirements to which they are subject. 

In an interpretive rule issued earlier this year, EPA determined that its GHG emission standards for motor vehicles will cause GHGs to become "subject to regulation" for purposes of both PSD and title V permitting on January 2, 2011.  
For more information see our April 6, 2010 Alert.

A separate rule, known as the "Tailoring Rule," established a phased timetable for implementing PSD and title V permitting under which these requirements would apply first to large sources of GHGs already subject to PSD for other regulated pollutants. 
For more information, see our May 14, 2010 Alert.

In the Tailoring Rule, EPA pledged to develop guidance before the end of 2010 to assist state permitting authorities and permit applicants with PSD and title V permitting in the context of GHGs.  In particular, EPA promised to provide advice on BACT determinations.

CONTENTS OF THE GUIDANCE The November 10 guidance consists of a number of different documents.  First, EPA has provided a general guidance document entitled "PSD and Title V Permitting Guidance For Greenhouse Gases," which includes a set of appendices with illustrative examples of BACT determinations for different types of facilities. 

EPA also has provided white papers with basic technical information concerning available and emerging GHG emission control technologies and practices.  The white papers cover the following types of facilities: 1) coal-fired electric generating units, 2) industrial, commercial, and institutional boilers, 3) the pulp and paper manufacturing industry, 4) the Portland cement industry, 5) the iron and steel industry, 6) the petroleum refining industry, and 7) the nitric acid production industry.  None of the white papers define BACT for a particular sector, but rather provide data on a variety of available control strategies.

In addition to the documents released, the EPA has created a "Greenhouse Gas Emission Strategies Database," which contains sector-based information on strategies and control technologies for GHG mitigation.  It currently contains information for two industrial sectors: electricity generation and cement production.  

DISCUSSION OF BACT DETERMINATION PROCESS The guidance does not identify BACT for specific types of facilities, and indeed does not establish absolute boundaries that limit a permitting authority's discretion when issuing a BACT determination for GHG emissions. 

Instead, the guidance emphasizes that the five-step top-down BACT process for criteria pollutants under the CAA generally remains the same for GHGs.  It also stresses that state permitting authorities utilizing this process retain significant discretion in making BACT determinations, subject to the requirement that they document their decision-making process. 

In the first step of the five-step process all available control technologies are identified.  In the second step, options that are not technically feasible for the particular facility are eliminated.  In the third step, the remaining control technologies are evaluated and ranked based on environmental effectiveness.  In the fourth step, the cost effectiveness of the controls and their other energy and environmental impacts are evaluated.  In the fifth step, a BACT emission limit is established for the facility. 

In adhering to this original five-step process, the EPA has structured the guidance to allow state permit writers to consider many different reduction techniques in GHG permit applications.  EPA's guidance does not preclude any particular fuels or plant designs, and notes that BACT should not be used to regulate the applicant's purpose or objective for the proposed facility. 

However, the Agency does not prevent permitting authorities from considering broad ranging modifications like fuel switching in step one of the top-down BACT analysis at their own discretion, noting only that if such a broad change is found to be BACT, the reasoning must be adequately documented. 

EMPHASIS ON ENERGY EFFICIENCY While the guidance does not prescribe BACT in any area, it does remark that GHG reduction options that improve energy efficiency will be BACT in many or most instances because they cost less than other environmental controls, may even reduce costs, and other add-on controls for GHGs are limited in number and are at differing stages of development or commercial availability.

Energy efficiency can include technologies, processes, and practices at the emitting unit.  The guidance emphasizes that energy efficiency should be considered in BACT determinations for all regulated criteria pollutants, not just GHGs, and notes that performance benchmarking will be an important tool in incorporating efficiency into BACT determinations.

CARBON CAPTURE AND SEQUESTRATION The EPA guidance recognizes that, other than energy efficiency, carbon capture and sequestration (CCS) may be the only "add-on" control option for reducing GHG emissions.  Specifically, the guidance states that CCS should be identified as an available control measure in step one of the top-down BACT process for such sources as fossil-fuel power plants, cement production, and iron and steel manufacturing.  However, EPA acknowledges that, in most cases, CCS will be eliminated in subsequent steps because of its technical complexity and cost.  Under this approach, in many permitting proceedings the permitting authority will have no choice but to evaluate the technical feasibility and cost-effectiveness of CCS, and explain why CCS either is or is not a viable option for BACT.

BIOMASS The guidance makes clear that EPA is still planning to issue further information on how to consider biomass as fuel, including whether facilities may exclude emissions from biomass use in determining whether they are subject to PSD permitting requirements.  However, the Agency also states that, even before issuance of this further guidance, permitting authorities are free to take the environmental, energy and economic benefits that accrue from using biomass and other biogenic sources for energy generation into account when setting the BACT standard.  This will allow permitting authorities to determine that in some cases the biomass component of a fuel stream is itself BACT for GHGs.  The guidance states that EPA will provide additional information on biomass' incorporation into the BACT standards in January 2011.

FUEL-SWITCHING The guidance does not say that fuel switching (e.g. from coal to natural gas) should be selected as BACT for a power plant, and emphasizes that, in most cases "the option of using natural gas as a primary fuel would fundamentally redefine a coal-fired electric generating unit."  However, the guidance makes clear that state permitting authorities reviewing such a unit may take into consideration the availability of lower emitting coal. EPA also states 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, EPA stresses that permitting authorities must explain and document in the record any decision to exclude fuel switching options on "redefining the source" grounds, particularly where such an option has been identified as significant in public comments.

COST The guidance has a general discussion of how permitting authorities should assess the cost of emission control options in the BACT process. However, the agency does not specify a particular cost-per-ton or other metric as a recommended upper bound.

ADDITIONAL DETAIL ON APPLICABILITY The guidance includes additional details on how to calculate the applicability of the PSD and title V permitting obligations, including flow charts and formulae. 

NEXT STEPS The EPA is currently taking comments on the GHG permitting guidance, but asks that any comments be confined to correction of technical or calculation errors or requests for clarifications. 

EPA has stated that, if appropriate, it will issue a revised version of the guidance before the permitting takes effect on January 2, 2011, and it has pledged to work with states not ready to issue permits to move toward readiness.  To this end, the EPA has set up what it calls a "permitting action team" to work with state authorities on GHG permitting.

Notwithstanding these efforts, the EPA guidance just released falls short of providing clarity on how a permit authority will establish BACT for GHG emissions. This uncertainty will add further complications and the risk for legal challenges in all future BACT determinations.

Van Ness Feldman closely monitors federal and state developments on climate change, air quality, and energy policy, and is in a strong position to provide expert analysis and advice on emerging legislation and regulatory activity, the surrounding policy and political debate, and the implications for your organization.  If you would like more information, please contact Kyle DanishStephen Fotis, Lisa Epifani, or any member of the firm's Climate Change practice at (202) 298-1800.  Those interested in on-going coverage of climate change policy developments may wish to subscribe to the weekly Climate Change Policy Update here.

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