October 1, 2010
Uncertainty Follows EPA Edict
Greenhouse gas endangerment finding sparks new requirements for aggregate industry customers.
By Carolyn McIntosh
On Dec. 7, 2009, the United States Environmental Protection Agency (EPA) issued the final Greenhouse Gas (GHG) endangerment finding under Section 202(a) of the Federal Clean Air Act (CAA), 42, U.S.C. § 7521. EPA focused on six GHGs — carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). The endangerment finding set the wheels in motion first for reporting emissions of GHGs and, by Jan. 2, 2011, for requiring permits for GHG emissions from new and modified stationary sources. GHG will have increasingly more significant implications, directly and indirectly, for the aggregate industry. The EPA has proposed to expand GHG emissions reporting to cement production; onshore and offshore petroleum and natural gas production, processing, transmission, underground natural gas storage, and distribution; underground coal mines; and industrial wastewater treatment; among other industrial activities, starting in January 2011. Larger GHG emissions sources will be subject to permitting, as well.
To avoid triggering permit requirements for thousands of large and small stationary sources (at an estimated cost of more than $22 billion), the EPA issued the “tailoring rule” on May 13, 2010. This rule establishes new, higher thresholds solely for GHG emissions to trigger permit requirements under the New Source Review (NSR), Title V, and prevention of significant deterioration (PSD) operating permits programs. The rule applies a threshold of 25,000 metric tons of CO2 for permitting purposes, but also sets a new “significance level” of 10,000 metric tons for facility modifications to avoid triggering permit requirements at current thresholds of 100 or 250 tons per year. The rule will impose NSR or Title V permitting for what the EPA estimates to be nearly 70 percent of the nation’s largest stationary source GHG emitters — including power plants, refineries, and cement production facilities — while shielding small businesses and farms from permitting requirements. Larger asphalt manufacturing plants will likely trigger reporting and new permit requirements, as well.
The EPA established a deadline of Aug. 2, 2010, for all states to determine their ability to enforce GHG emissions permitting requirements. On Sept. 2, 2010, the EPA issued a proposed rule identifying 13 states in which the NSR or PSD programs are substantially inadequate to meet Clean Air Act (CAA) requirements because they do not appear to apply PSD requirements to GHG-emitting sources: Alaska, Arizona, Arkansas, California, Connecticut, Florida, Idaho, Kansas, Kentucky, Nebraska, Nevada, Oregon, and Texas. Texas has notified the EPA that it will not revise its regulations to comply with the new rules, and a number of states have filed lawsuits against the EPA to challenge the rule. A number of other states will likely not meet the Jan. 2, 2011 deadline. Accordingly, also on Sept. 2, 2010, the EPA proposed a Federal Implementation Plan rule to apply in any state that is unable (or unwilling) to submit, by the deadline, a corrective State Implementation Plan revision to ensure that the state has authority to issue permits under the CAA’s NSR and PSD programs for sources of GHGs.
The EPA’s endangerment finding has been challenged in numerous cases. It will likely be several years before this litigation completes its journey through the federal courts. Moreover, with the make-up of the United States Supreme Court anticipated to become more liberal, the endangerment finding will likely be upheld. Similarly, the challenges to the tailoring rule will take several years, but in the interim, different regions of the country may have different judicial decisions governing permitting requirements. If the tailoring rule is successfully challenged in court, small and large sources of GHG emissions, from underground fuel storage tanks to cement and asphalt plants, will be subject to permit requirements. Even if the tailoring rule is upheld, new and modified cement and asphalt plant GHG emitters of 25,000 metric tons of CO2 or 10,000 metric tons of GHGs will trigger permit requirements. The cement manufacturing operations that are using tire derived fuel may well be at a regulatory disadvantage from coal or natural gas-fuelled plants, simply due to increased GHG emission controls. In addition, starting in January 2011, underground natural gas storage and industrial wastewater treatment facilities, among others, will have to start measuring their GHG emissions for reporting in January 2012.
Even if these new monitoring, reporting, and permitting requirements do not directly affect a given aggregate mining operation, it will affect the industry as a whole, because some of the industry’s largest customers will be experiencing regulatory uncertainty as these new GHG rules go into effect. The aggregate industry’s customers will also be incurring increased costs of operation as they implement the new GHG requirements for monitoring, reporting, and obtaining permits. In closing, this is a regulatory area that is subject to continuing changes for at least the next several years, requiring continued monitoring and evaluation by the aggregate industry. Given the uncertainty regarding the rule, companies should consult with their legal counsel and consider regulatory consequences before making changes that might have greater implications. AM
Carolyn McIntosh is a partner in the Patton Boggs LLP’s Denver office, where she practices environmental law. She can be reached at 303-894-6127 or firstname.lastname@example.org.