U.S. EPA recently proposed two rules requiring businesses planning to build new facilities, or make major expansions to existing facilities, to obtain permits under the Clean Air Act’s Prevention of Significant Deterioration (PSD) program for their Greenhouse Gas (GHG) emissions. (Hereafter, “GHG/PSD permits.”)

These rules, published August 12, 2010, would implement EPA’s May 2010 GHG Tailoring Rule, which requires power plants, industrial boilers, oil refineries, and other large combustion sources to obtain permits for GHG emissions beginning in 2011.

Here are five things businesses should do in preparation for the proposed GHG air permit rules:

1. Watch:  state regulations will have to change before January 2, 2011 to address GHGs.

Since most states implement the federal Clean Air Act through state rules called State Implementation Plans (SIPs), EPA’s first rule proposes to require states to revise their SIPs before January 2, 2011 to address GHG permitting. EPA must approve all SIP changes before they can implement the federal law. Since EPA’s GHG/PSD rules are not even final yet, EPA proposes an incredibly brief period for state rulemaking. Businesses must watch their states’ rulemaking processes very closely to keep track of and take advantage of opportunities to participate in rulemaking. Many states have already started GHG/PSD rulemaking in anticipation of the federal mandates.

2. Read and understand:  EPA will promulgate GHG/PSD permit rules for any State that cannot revise its SIP by January 2, 2011.

EPA’s second rule proposes overarching Federal permit rules that will also take effect on January 2 for any state that cannot timely promulgate its own rules. Many states’ rulemaking laws contain public notice and comment timetables that cannot be completed by then. Further, it is unlikely EPA will be able to approve even timely submitted state rules by its own deadline. Thus any state that does not have EPA-approved GHG/PSD rules in place by January 2 will be subject to EPA’s rules until it can get its own rules promulgated and approved.

3. Plan: many businesses subject to the GHG Tailoring Rule will not be allowed to build or expand significantly without first obtaining a GHG/PSD permit after January 2, 2011.

Businesses need to start planning for GHG/PSD permits immediately for any anticipated projects that will increase GHG emissions. Since the average time to process a PSD application is about a year in most states, and since it often takes months just to prepare the application, businesses must always consider PSD permits whenever planning a construction project. Since GHGs are new to permitting, it will probably take even longer for states and the EPA to process the first batch of GHG/PSD permits. Any business potentially subject to such permits needs to plan both quickly and carefully stating now. 

4. Sharpen your pencils: business subject to GHG/PSD permitting must apply “best available control technology” to reduce GHG emissions as much as currently available technology can accomplish.

All the requirements of the PSD permit program will apply to regulated GHGs under EPA’s proposed rules.  Businesses, not the government, must determine what constitutes “best available control technology” or BACT when they submit their GHG/PSD applications. These determinations are subject to the permitting authority’s review, which may grant, or deny, BACT approval late in the permit process. In states with EPA approved GHG/PSD SIPs, EPA may comment on and even challenge state-issued PSD permits, and can even bring enforcement actions against sources if it does not like the state–issued permits.  In states without approved SIPs, EPA makes the BACT determinations. It is currently difficult to predict what EPA will determine BACT is for controlling GHGs from various types of sources; it is safe to say EPA will be strict and its decisions will be controversial. Businesses should determine whether their industry associations are already discussing BACT for GHGs with EPA.

5. Participate: businesses must take advantage of every opportunity to comment on proposed GHG/PSD rules at both the State and Federal levels.

Businesses may submit comments on the proposed EPA GHG rules, and will also have that right when states propose their own rules. Businesses may also participate in public hearings. EPA has afforded affected businesses only until September 12, 2010 to prepare and submit written comments, an almost ridiculously short time given the momentous nature of the proposed rules. 

On August 30, EPA announced in the Federal register a one-day public hearing to be held on September 14, 2010. All affected business should demand the public comment period and the proposed effective date be pushed back, so there is an adequate opportunity to figure out the proposed rules’ impacts. Business should also demand additional public hearings in various locations throughout the country, an approach EPA usually takes for significant rulemaking actions. Check with your trade associations to determine what effort are being made to prepare presentations for the public hearing and written comments, and participate if you can. 

However, all potentially affected business should submit as many substantive comments as possible on or before September 12, 2010, since in the past EPA has been disinclined to afford additional time to comment on GHG rulemakings. Local governments and states should also comment, since economic development plans may be affected by GHG/PSD permits, while states must meet the burden of implementing the GHG/PSD program.

Everything about GHG regulation has been controversial and that trend will continue. Is the issue so urgent that EPA must rush new rulemaking into effect with little or no opportunity for public comment and possibly before states can adopt their own rules?  EPA apparently thinks so. Now, more than ever, businesses must prepare for new GHG air permit rules.

For more information on how to prepare for GHG air permitting, please contact Larry Vanore or any member of Taft’s environmental practice group.