By William C. Schillaci

Final rule adds PAL streamlining

In Step 3 of its phased-in approach to requiring Prevention of Significant Deterioration (PSD) and Title V permits for sources of GHG emissions, the EPA has decided not to change the emissions thresholds that trigger the requirement for sources to obtain the permits. Effectively, this means that for the time being, only the largest sources of GHG emissions will be required to obtain permits. EPA’s final rule should come as a temporary relief to industry, which had feared the Agency’s commitment to move quickly to expand the GHG program to smaller sources, an action that could potentially subject these entities to onerous permitting requirements for the first time.

The EPA has stated that expansion of the permitting program to smaller sourceswill not occur unless the Agency sees that state permitting agencies have developed the resources to manage the added administrative burden. The Agency now indicates that state agencies are generally in no position to assume a new level of permitting responsibilities. While it does seem likely that the universe of sources that will need to obtain GHG permits will at some point be enlarged, the limited and sometimes dwindling resources of state permitting bodies suggest that change is not in the immediate future.

However, that prospect may look different if the EPA makes progress in developing what it calls streamlining mechanisms that would allow state permitting authorities to more expeditiously process a larger number of permits. While the final rule contains one such mechanism for plantwide applicability limits (PALs), that action by itself was not sufficient to persuade the EPA that permitting authorities possess all the tools they need to ramp up their permitting activities.

Under the Clean Air Act’s (CAA) PSD program, sources must acquire permits on the basis of annual potential emissions rates of 100 or 250 tons per year (tpy) (depending on the source category) of what are called New Source Review (NSR) pollutants. An “NSR pollutant” is defined as any pollutant subject to a National Ambient Air Quality Standard (NAAQS), any pollutant subject to a new source standard of performance under CAA Section 111, any certain types of stratospheric ozone-depleting substances, or any pollutant otherwise subject to regulation under the CAA (with certain exceptions for hazardous air pollutants under CAA Section 112).

When the EPA decided it had the authority to regulate emissions of GHG, it became apparent that those thresholds would place so many sources in the PSD permitting program that the resulting administrative burden for permitting authorities would be “absurd.” EPA’s June 2010 Tailoring Rule addressed the problem by phasing in applicability of PSD and Title V to GHG-emitting sources so that those requirements would apply to at least the largest sources initially and to as many more sources as promptly as possible, “at least to a certain point.”

Under the phase-in approach, Steps 1 and 2 required PSD permits for new facilities with GHG emissions of at least 100,000 tpy of carbon dioxide equivalent (CO2e) and existing facilities with at least 100,000 tpy CO2e when these facilities make changes that would increase GHG emissions by at least 75,000 tpy CO2e. Facilities that must obtain a PSD permit anyway to cover other NSR pollutants must also address GHG emissions increases of 75,000 tpy CO2e or more. New and existing sources with GHG emissions above 100,000 tpy CO2e must also obtain Title V permits. When issuing the Step 1 and 2 100,000/75,000 tpy applicability thresholds, the EPA anticipated that under Step 3, those thresholds would be lowered to 50,000/50,000 tpy CO2e.

In the preamble to the Tailoring Rule, the EPA indicated that any decision to lower the PSD thresholds would be based on three criteria. Those criteria are listed below along with EPA’s view on what progress has been made in satisfying each.

• Permitting authorities have had the time and resources to ramp up their permitting infrastructure (e.g., hiring and training staff) to address increased permitting requirements. According to the EPA, states have not had the opportunity to obtain the necessary resources to develop infrastructure to accommodate the level of permitting under the 100,000/75,000 tpy CO2e applicability established in Steps 1 and 2. Therefore, any move to increase permitting by lowering the thresholds to 50,000/50,000 tpy would place wholly unreasonable expectations on permitting agencies. The EPA references a June 2011 letter from the Association of Clean Air Agencies to the U.S. House of Representatives, which notes that 80 percent of 40 state and local air quality agencies experienced a decline in staff over the preceding 4 years. These cutbacks resulted in curtailing core air program activities, including permit issuance. Lowering the permitting thresholds to 50,000/50,000 tpy would increase administrative burdens by 40 percent above the levels created by Steps 1 and 2 and 99 percent above the pre-GHG permitting burdens, notes the EPA. Permitting bodies would also need to conduct additional outreach and education for many regulated entities that may not even be aware of their new regulatory obligations. An improvement in economic conditions may alter the landscape, but at present, the EPA sees little evidence that this criterion has been satisfied.
• Sources are able to meet the requirements of the PSD program, and permitting authorities are able to issue timely permits. The EPA had expected that permitting authorities would have prepared for the anticipated surge in permitting activity by establishing “efficient methods for resolving issues and processing permits.” Again, there is no evidence that these efficiencies have appeared. Specifically, notes the EPA, at the time of the December 1, 2011, proposal, both the EPA and permitting authorities had issued 18 GHG PSD permits in 11 states, with almost all of those states issuing only one permit. By May 21, 2012, that number increased to 44 permits. Furthermore, there has been little if any Title V permitting activity to this point, adds the EPA. Absent the expected efficiencies and considering the small number of PSD permits issued, the EPA concludes that the timely issuance of permits is not occurring.
• The EPA and the states have developed streamlining measures. In the Tailoring Rule, the EPA said it planned to evaluate five general approaches to streamlining: (1) defining potential emissions to be closer to actual emissions for various source categories; (2) establishing emissions limits for presumptive best available control technology (BACT) for various source categories; (3) encouraging use of general permits or permits-by-rule; (4) encouraging use of electronic permitting; and (5) encouraging the application of more efficient techniques (Lean techniques) to the permitting process. The EPA says it is continuing to work on these streamlining options, which may take several years to bring to fruition. In the Step 3 rule proposal, the EPA specifically proposed two streamlining mechanisms: the PAL approach described below and an opt-in approach that would allow sources that are not currently major sources to obtain a PAL. Based on feedback from stakeholders, the Agency decided to finalize only the PAL mechanism and not take action on the opt-in approach.

A “PAL” is an emissions limit applied sourcewide rather than to a specific emissions point(s). With a PAL, a source can make changes to the facility without triggering PSD permitting requirements as long as emissions do not increase above the limit established by the PAL. A PAL is generally effective for 10 years and, during that period, benefits both the facility and the permitting authority, which do not have to shoulder the substantial technical, interagency, and public communication burdens associated with issuing a PSD permit.

But under existing PSD regulations, PALs are available only to “major sources,” which are defined under the PSD program as those that emit 100 or 250 tons or more of a traditional NSR pollutant. Only those sources that plan to undertake facility modifications that would result in emissions of NSR pollutants that would qualify them as major sources would also be entitled to a PAL. This approach does not benefit GHG-only sources that are not major sources since they would need to become major sources to qualify for a PAL. A GHG-only source is an existing stationary source that emits or has the potential to emit 100/250 tpy of GHGs on a mass basis and emits or has the potential to emit 100,000 tpy CO2e or more, but does not emit or have the potential to emit any other NSR pollutant at or above the applicable major source threshold. Practically speaking, this means that to issue a PAL, a permitting authority would need to require that a GHG-only source undertake an action that would make its GHG emissions subject to regulation (i.e., an action that increases GHG emissions by at least 75,000 tpy CO2e), thereby bringing the source into major stationary source status under the Tailoring Rule.

EPA’s streamlining provision changes this by allowing GHG PALs to be established on a CO2e basis as well as on the pollutant-mass basis that is traditionally used. Specifically, under the final rule, a permitting authority issuing a CO2e-based PAL may add 75,000 tpy CO2e to a source’s CO2e baseline actual emissions to establish the PAL level. GHG-only sources may thereby qualify for a PAL without becoming a major source as defined by the PSD program.

All this allows GHG-only sources to make the changes necessary to respond rapidly to market conditions, while generally ensuring that the environment is protected from adverse impacts from the change, states the EPA. The Agency adds that the availability of PALs should encourage GHG-only sources to control their GHG-emissions through efficiency improvements or the use of other emissions reduction procedures, processes, or equipment and thereby avoid emissions increases that trigger PSD permitting requirements. According to this scenario, the burden on state permitting authorities should be lowered.

Finally, in considering whether to lower the GHG PSD permitting thresholds, the EPA considered the actual environmental benefits that would result from doing so. The Agency notes that lowering the thresholds to 50,000/50,000 tpy CO2e would bring within the sphere of the PSD program an additional 3 percent of the national inventory of GHG emissions while potentially subjecting over 4,500 additional sources to permitting. But, in any year, only a fraction of national GHG stationary source emissions would actually become subject to PSD controls because only a fraction of sources would undertake modifications or new construction that trigger BACT controls. Thus, the additional reductions in GHG emissions from lowering the thresholds in Step 3 would be small under any circumstances, even if the thresholds were lowered to 50,000/50,000 tpy CO2e.

“This small amount of incremental environmental benefit from lowering the thresholds, coupled with the additional burden associated with permitting these sources (in light of the lack of increase in state resources and experience as well as the lack of streamlining measures), supports the reasonableness of our determination not to lower the thresholds in Step 3,” states the EPA.

EPA’s Step 3 final rule on GHG PSD permitting was published in the July 12, 2012, FR.