When Do EPA BACT Requirements "Redesign the Source"? Not When EPA Says They Don't
Shortly before the holidays, EPA Administrator Jackson issued an Order in response to a challenge to a combined Title V / PSD permit issued by the Kentucky Division for Air Quality to an Integrated Gasification Combined Cycle, or IGCC, plant. The Order upheld the challenge, in part, on the ground that neither the permittee nor KDAQ had adequately justified why the BACT analysis for the facility did not include consideration of full-time use of natural gas notwithstanding that the plant is an IGCC facility.
The Order may not be shocking in today’s environment – all meanings of that word intended – but the lengths to which the Order goes to avoid its own logical consequences shows just what a departure this decision is from established practice concerning BACT. BACT analyses have traditionally involved the proverbial “top-down” look at technologies that can be used to control emissions from a proposed facility. In other words, EPA takes the proposal as a given, and then asks what the best available control technology is for that facility.
In EPA’s own words – from its New Source Review Workshop Manual (long the Bible for BACT analysis):
Historically, EPA has not considered the BACT requirement as a means to redefine the design of the source when considering available control alternatives. For example, applicants proposing to construct a coal-fired electric generator, have not been required by EPA as part of a BACT analysis to consider building a natural gas-fired electric turbine although the turbine may be inherently less polluting per unit product (in this case electricity).
Apt example, don’t you think? (In case you are wondering, EPA’s decision does not discuss or refer to this text from the NSR Manual.)
What was the basis for EPA’s decision here? Largely, it is that the IGCC facility will be designed to burn natural gas as well as syngas and the permittee specifically stated that it planned to combust natural gas during a 6-12 month startup period. On these facts, EPA concluded that the permittee and KDAQ had to do a better job explaining why full-time use of natural gas should be considered “to redefine the design of the source.”
As noted above, EPA went to great lengths to minimize the scope of the decision. It states that the Order:
should in no way be interpreted as EPA expressing a policy preference for construction of natural-gas fired facilities over IGCC facilities.
should not be interpreted to establish or imply an EPA position that PSD permitting authorities should conclude … that BACT for a proposed electricity generating unit is … natural gas.
does not conclude that it is not possible or permissible for the permit applicant … to develop a rationale which shows that firing exclusively with natural gas would “redefine the source.”
EPA does not intend to discourage applicants that propose to construct an IGCC facility from seeking to hedge the risk of investing in … IGCC technology by proposing … utilizing natural gas for some period….
Methinks EPA doth protest too much. If I may say so, this is a freakin’ IGCC facility. Isn’t it obvious that one doesn’t plan or build an IGCC facility if one plans to burn natural gas? Don’t you think that EPA could have taken administrative notice of what IGCC technology is?
All of EPA’s protestations about the Order’s limits may be designed to mollify IGCC supporters, but what does its rationale mean for all of the existing facilities – coal and oil – that are already capable of firing on natural gas? Next time they are subject to NSR/PSD review, must they evaluate the possibility of switching completely to natural gas? As I’ve said here before, yikes!
EPA Tries to Silence Employees Who (Weakly) Criticize Cap-And-Trade
Obama’s EPA finds itself embroiled in a controversy that recalls the Bush Administration: trying to control what the agency’s employees can say about climate change. Today’s controversy is more limited, and more nuanced, than earlier ones. EPA is no longer asking its employees to deny that climate change exists. Instead, EPA has asked two of its attorneys to stop identifying themselves as EPA experts when they publicly criticize a cap-and-trade system for regulating greenhouse gases. Still, I wonder why EPA cares.
EPA previously allowed the attorneys to criticize cap-and-trade as private citizens. The two wrote letters and opinion pieces claiming cap-and-trade doesn’t work, primarily because companies can buy “offsets” that allow them to continue operations without reducing their emissions. They claim a carbon tax would work better than cap-and-trade.
Their writings have not had much effect on the debate in Congress and elsewhere. So the two recently switched from the written word to YouTube, posting a carefully produced video in which they more assertively cite their EPA credentials and experience to justify their critique of cap-and-trade. And as Grist recently noted, EPA took the bait.
EPA should stop worrying about the two attorneys. The two fail to recognize that cap-and-trade works fine when it’s done right. In fact, EPA itself runs one of the most successful cap-and-trade programs in the world. Several years ago, EPA needed to reduce smog in the eastern US. Instead of using typical command-and-control regulations, EPA created the NOx Budget Trading Program. Just last month, EPA released a report on the results achieved by that program. According to EPA, “summertime NOx emissions from power plants and large industrial sources were down by 62 percent compared to year 2000 levels and 75 percent lower than in 1990.”
And the emitters were able to achieve these reductions at a lower cost by trading with other emitters who had cheaper options for compliance. Smithsonian magazine reported a recent estimate that businesses paid only $3 billion to achieve emission reductions that would have cost them $25 billion under traditional command-and-control regulation.
The two attorneys don’t even need to worry about companies finding ways to avoid compliance with the system. Last year, only two emitters failed to comply out of 2,568, even then by only a modest amount. This is not a system full of loopholes.
Finally, the two attorneys ignore the fact that their own agency, under the Obama administration, will get to write the rules for how companies comply with a carbon cap-and-trade system. Both the Waxman-Markey and Boxer-Kerry bills require EPA to write rules regulating how companies can use “offsets” to comply with the system. Surely the agency can write rules that make this cap-and-trade system work as well as the NOx system the agency already runs.
And one more thing: As Grist reports, many experts think that the alternative — a carbon tax — may not achieve the emission reductions we need. We can only guess what carbon price might lead to the right amount of emission reductions. We’ll get the tax revenues we predict, but not necessarily the carbon reductions.
So the two attorneys should lighten up on their criticisms. But even if they don’t, EPA should stop worrying about them so much.
Another Corner Heard From: Portland (Oregon) Releases a New Climate Action Plan
Last week, the City of Portland, Oregon (together with Multnomah County) released an updated Climate Action Plan. The Plan presents a number of aggressive goals and targets, with ultimate goals of GHG reductions of 40% by 2030 and 80% by 2050.
The details of the Plan are obviously only relevant to those in the Portland area, but for those anticipating what regulation might look like in California, Massachusetts, and other states that have enacted or will soon enacted some version of a Global Warming Solutions Act, the Plan provides a helpful catalogue of the types of changes that might be sought. Therefore, a quick summary of some of the 2030 goals seems warranted
Reduce energy use from existing buildings by 20%-25%
All new buildings – and homes -- should have zero net GHG emissions.
Reduce VMT by 30% from 2008 levels
Recover 90% of all waste generated
Reduce consumption of carbon-intensive foods
Expand “urban forest canopy” to cover one-third of Portland
Reduce emissions from City and County operations by 50% from 1990 levels
What’s my take? I have two immediate reactions. First, if any further evidence were needed that attaining significant GHG emission reductions is going to involve major social and economic changes, this is certainly it.
Second, and perhaps more importantly, this Plan, and others like it, have to constitute a heavy thumb on the side of the scale arguing for comprehensive federal legislation. In the past, I’ve argued that federal legislation would be preferable to a patchwork made up of EPA regulation under existing Clean Air Act authority, public nuisance litigation, and state and regional initiatives. To that list, we can now add comprehensive local regulation. I don’t mean to be too sanguine about the ability of federal legislation to harmonize this entire process; the existing bills would not preempt most state, regional, and local regulations (other than cap-and-trade programs). Nonetheless, delays in federal enactment can only contribute to the proliferation of state, regional, and local programs, some of which may be beneficial, but many of which will be inefficient, contradictory, or both.
GHG Regulation under the Existing CAA: Coming Soon to a [Large] Stationary Source Near You
On Thursday, EPA issued its long-awaited proposed rule describing how thresholds would be set for regulation of GHG sources under the existing Clean Air Act PSD authority. Having waded through the 416-page proposal, I’m torn between the appropriate Shakespeare quotes to describe it: “Much ado about nothing” or “Methinks thou dost protest too much.”
First, notwithstanding its length, the proposal is quite limited in scope. In essence, it has three parts:
Establishment of an applicability threshold for PSD and Title V purposes of 25,000 tons per year of CO2e.
Establishment of a PSD significance level of from 10,000 tpy CO2e and 25,000 CO2e.
Development over the next five years of means to streamline GHG regulation of sources greater than the current statutory levels of 100-250 tpy.
Basically, EPA’s position is that, once it begins to regulate GHGs as a pollutant by promulgating its mobile source rule – expected next spring – stationary source regulation under the PSD and Title V programs follow automatically. Thus, the issue for EPA at this point is not whether to regulate stationary sources, but how to do so without the entire program grinding to a halt.
Here’s where the protestation comes in. Most of the proposal is devoted to explaining EPA’s reliance of the doctrines of “absurd results” and “administrative necessity” to justify exclusion of sources that would seem to be categorically included by the explicit language of the statute. Members of the regulated community will understand the irony in EPA’s extensive discussion regarding how the purpose of the PSD program is to achieve environmental protection and economic development – and that this latter purpose would be jeopardized by regulation of sources at the 100/250 tpy threshold. I don’t think we will ever again see EPA devote this many pages to a description of its concern about economic growth.
I’m not going to predict here whether EPA will win any challenge to the higher thresholds. Certainly, the absurd results doctrine argument is the stronger of the two. It is noteworthy that the four leading environmental cases EPA cites in support of its administrative necessity argument, while acknowledging the existence of the doctrine, all went against EPA.
More relevant still is the question of who would in fact challenge this regulation and what would be the result even if the challenge succeeded. Following the debacle that resulted from vacation of the CAIR rule, what is the likelihood that a successful challenge would result in vacation of the rule in its entirety? Isn’t it more likely that the rule would stay in effect as to the large sources, with the remanding the case to EPA to promulgate rules governing smaller sources? In fact, that’s what EPA is already doing, which is probably EPA’s strongest practical argument in support of the rule.
Public comments will be due 60 days from Federal Register promulgation and there are some issues that the regulated community should consider. These include the significance threshold, and suggestions regarding how to streamline the program for smaller sources. EPA has proposed some interesting ideas, including presumptive BACT determinations and general permits.
Bottom line? Large sources better get ready to comply. Smaller sources, take a deep breath and count your blessings – for now.
It's Here: EPA's Final Mandatory GHG Reporting Rule
On April 14, 2009, I alerted you to EPA’s proposed Mandatory GHG Reporting rule on April 10, 2009. And while we are still waiting for EPA’s Endangerment Finding, and new energy legislation may not see the Senate floor in 2009, we do have a final GHG rule. On September 22, 2009, EPA Administrator Jackson signed the final Mandatory Greenhouse Gas Reporting Rule. This rule should be published in the Federal Register soon, so that it becomes effective before January 1, 2010. The rule imposes monitoring requirements beginning January 1, 2010, and reporting by impacted facilities and other entities by March 31, 2011.
With this rule, EPA is requiring reporting of Greenhouse Gas (“GHG”) emissions by specified GHG emission source categories that exceed 25,000 metric tons of carbon dioxide (“MTCO2”), or varying amounts of several other GHG representing equivalent amounts of emissions based upon their “global warming potential,” referred to as “CO2e.” The rule also requires emissions reporting from suppliers of fuels and industrial gases, as well as mobile source (vehicle) manufacturers. EPA finds its authority for this rule in the Clean Air Act, Sections 114 and 208. The GHGs tracked by the rule include carbon dioxide (CO2), methane (CH4), nitrous oxide (N20), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6) and other fluorinated compounds. Those familiar with the annual Inventory of United States GHG Emissions and Sinks will recognize the sources and GHGs tracked by this rule.
Generally, the final rule is not significantly changed from the proposed rule. However, several source categories were reserved. Thus, this final rule does not currently require reporting of the following source categories: electronics manufacturing, ethanol production, fluorinated GHG production, food processing, industrial landfills, magnesium production, oil and natural gas systems, SF6 from electrical equipment, underground coal mines, wastewater treatment, suppliers of coal.
Additionally, there are several important revisions. In response to significant objections to the “once in, always in” approach for reporting requirements, EPA also included provisions allowing exit from the program upon reduction of GHG emissions below certain thresholds. Specifically, if a facility decreases its emissions below 25,000 metric tons of CO2e per year for five years in a row, or decreases its emissions below 15,000 metric tons of CO2e per year for three years in a row, the facility can apply to exit the program. Facilities can also cease reporting if they shut down GHG-emitting processes or operations.
In response to concern about lack of adequate preparation time, EPA added a provision allowing the use of best available monitoring methods for the initial quarter of 2010, rather than the required monitoring methods. Impacted facilities needing a longer period of time to install necessary monitoring equipment can request an extension beyond March 2010, but not beyond 2010. EPA has also modified monitoring options, changed monitoring locations and allowed use of calculations rather than monitoring to lessen the monitoring burden.
All environmental practitioners will need to become familiar with the requirements of this rule due to its broad applicability. EPA has committed to posting guidance for each subpart and conducting training. EPA has even posted an “applicability tool” computer software program to assist in applicability determinations. This guidance cannot be available soon enough. Clients need to determine applicability and prepare for implementation immediately.
BIOFUELS AND CLIMATE CHANGE
Biofuels are the subject of much recent interest and investment, as indicated by a recent Wall Street Journal article on biomass fueled power plants. Given the increasing scrutiny that is being given to “green” marketing claims by the Federal Trade Commission and various citizen groups (and the potential for SEC scrutiny of similar claims in public offering prospectuses), care should be taken to analyze and document the basis for any claims of carbon neutrality or other environmental benefits associated with particular biofuels.
Advantages cited by biofuel proponents include reduction of greenhouse gas (GHG) emissions as compared to fossil fuels, energy security, benefits from domestic production and green job creation. Downsides of biofuels production can include displacement of food crops and increased food prices, deforestation and conversion of grasslands to crop lands, GHG emissions associated with growing and converting biofuels, and other environmental impacts such as nutrient runoff and water consumption.
While all biofuels are renewable energy sources, this category includes a variety of liquid and solid fuels with a variety of sources and uses. For example, power plants can utilize biomass, generally in the form of wood or municipal solid waste. In the transportation arena, fuel can be made from corn and cellulose-based ethanol, or oils from soybeans, palm oil or animal wastes that can be used directly or chemically processed into biodiesel. Additional types of biofuels include syngas and algae-derived fuels.
Numerous “clean tech” companies as well as established energy multinationals have invested in biofuels production. Examples include Mascoma Corporation and Verenium Corporation (cellulosic ethanol), Changing World Technologies (biodiesel from animal waste), GreenFuel Technologies (algae-based fuel) and Biogas Energy and Harvest Power (methane from agricultural wastes). Large energy and waste management companies are also investing heavily in biofuels, including Covanta (biomass-fired power plants), BP, Chevron, and Shell Oil (bio-ethanol and biodiesel), and Waste Management (landfill gas). The market for biofuels is sensitive to oil prices and demand for transportation fuels, as evidenced by recent bankruptcies and economic distress in the corn-based ethanol industry.
Biofuels are supported by a variety of federal and state mandates, subsidies and tax credits. For example, the Energy Policy Act of 2005 established a renewable fuel standard, and this standard was increased by the Energy Independence and Security Act of 2007. Further, the Food, Conservation, and Energy Act of 2008 provides financial assistance to biorefineries, funding for advanced biofuels and biomass research, biomass crop assistance, and tax credits for cellulosic ethanol production, among other measures. In addition, the American Recovery and Reinvestment Act of 2009 provides for loan guarantees, tax credits, and Department of Energy research related to biofuels and biomass energy. Ethanol proponents are pressing Congress to further increase the mandate for ethanol use in transportation fuels, but many groups are simultaneously opposing such an increase.
Biofuels are often claimed to be “carbon neutral” (i.e., producing no net GHG emissions), because the plants from which they are derived only emit the same amount of carbon they would have released if they naturally died and decomposed, as compared to fossil fuels that release carbon stored in the earth’s crust that would not have been emitted. But not all biofuels are equal and generic claims of carbon neutrality need further scrutiny.
Recently, a number of studies have attempted to assess the lifecycle GHG emissions of various biofuels. For example, several studies, including a leading study by the University of Minnesota and a California study performed in association with its low-carbon fuel standard, have concluded that corn-based ethanol may result in minimal net GHG emission reductions or even net GHG increases. This conclusion has been supported by scientists from The Nature Conservancy in a study published in Science that examines the GHG emissions and other environmental impacts of land use changes involved in the production of various biofuels. They conclude that there are significant differences in the “carbon footprint” of different biofuels based on how and where the underlying crops are grown. In its recent proposed regulations for the National Renewable Fuel Standard, EPA has proposed to require evaluation of GHG emissions over the full lifecycle of various biofuels and to establish life cycle GHG emission reduction thresholds as compared to a lifecycle emissions analysis of baseline petroleum fuels – a requirement that is opposed by corn-based ethanol proponents.
It is clear that advanced biofuels, such as cellulosic ethanol and some types of biodiesel, hold great promise to reduce GHG emissions from transportation and other fuel uses. Such biofuels are clearly part of the solution in mitigating climate change and developing a sustainable energy economy, but careful scrutiny is needed to ensure that the full life cycle GHG emissions and other environmental impacts of biofuels are considered by policymakers and investors.
Posted by Christopher P. Davis, Goodwin Procter LLP
A FIRST GLIMPSE OF THE ENVIRONMENTAL AGENDA OF THE OBAMA PRESIDENCY
It has been a long time since an environmental issue attracted some serious attention in a presidential campaign. This is the year, and climate change is the issue. From his campaign to his election night reference to a "planet in peril", President-Elect Obama has focused on climate change. There are a few other environmental issues to watch as well.
Climate Change
The issue of climate change overshadowed other environmental issues in this election, in part because it is directly linked to other high priorities of the new administration. Goals of creating 5 million green-collar jobs and a focus on renewable energy and energy conservation enlarge the profile of climate change initiatives. For example, on the Obama-Biden website, the topics of environment and energy are grouped together as one, and the initiatives of each are related.
Green house gases reduction is an important goal for President-Elect Obama. The goal to reduce greenhouse gases has many parts, but imposing an economy-wide cap and trade system is the centerpiece of the policy. The plan would require that all credits be purchased at auction by industry. Costs to purchase credits could be enormous.
In addition to domestic commitments to climate change initiatives, Obama supports "re-engaging" with the United Nations and the creation of a Global Energy Forum that includes the G8+5 Nations . The initial steps of his international policy may come soon when Obama's representatives will likely visit the climate change talks in Poznan, Poland this December.
The broadening Democratic majority in Congress favors Obama's climate change agenda. In addition to Democratic gains in the House and the Senate, the League of Conservation Voters reports that seven of its 2008 "dirty dozen" legislators were defeated in the 2008 election. Among environmental groups, hopes are high for the new presidency.
But because Obama's objectives require heavy investment in renewable energy, regulatory compliance, and clean technology, they face difficult hurdles. High deficits and the global financial crisis challenge the ability of the federal government to spend, the capacity of private markets to invest, and the resilience of the U.S. economy and industry to weather increased costs of regulation. Great investment would be required for meeting goals for clean coal technology, biofuel development, renewable energy, and energy efficiency.
Other Environmental Issues
Here are some of the other environmental issues to watch.
CERCLA issues have not received great attention so far. However, Obama has suggested reinstitution of the tax on industry to pay for orphaned sites and has emphasized the concept of "polluter pays".
For many years, changes to the General Mining Law of 1872 to impose royalty and/or additional regulation have been proposed and defeated. Although mining law reform has not been a significant part of the presidential campaign, the chances for its passage in the more Democratic congress has increased.
Obama's past opposition to offshore drilling weakened a bit this year in the Senate as a result of a compromised effort. Obama would support offshore exploration in areas already set aside for it, but his opposition to ANWAR remains firm.
It is unclear what priority the Obama administration will place on biodiversity and the Endangered Species Act. Biodiversity has received little attention in the campaign, but the campaign has opposed lessening of ESA consultation requirements.
