Late last week, eight Democratic senators expressed in a letter to EPA Administrator Lisa Jackson their economic and energy security concerns relating to the potential regulation of greenhouse gas (GHG) emissions from stationary sources under the Clean Air Act (CAA). A mere three days later, on February 22, 2010, Administrator Jackson issued a six-page response, in which she announced expected modifications to pending EPA proposals intended to, among other things, (1) delay the applicability of CAA permitting requirements to GHG emissions from stationary sources until January 2011, and (2) then limit those permitting requirements to large stationary sources that already must apply for CAA permits because of their non-GHG emissions. Other sources of GHG emissions would not be subject to CAA permitting requirements until some time between the latter half of 2011 and 2013, and the smallest sources of GHG emissions would not be subject to the permitting requirements until 2016 at the earliest, according to the letter. These changes reflect a relaxation of EPA’s previous position on when sources’ GHG emissions would require CAA authorization, and signal further recognition by EPA of the widely reported problems associated with treatment of GHGs as pollutants subject to CAA permitting requirements.

The senators’ concerns arise out of a chain of events dating back to the U.S. Supreme Court’s 2007 decision in Massachusetts v. EPA, in which the Court held, 5-4, that CO₂ was an “air pollutant” for purposes of Section 202 of the CAA, and that EPA was compelled by that section to issue CO₂ emission standards for motor vehicles if it found that such emissions endanger public health and welfare. EPA made that endangerment finding December 7, 2009, and so is required under Massachusetts to issue CO₂ emissions standards for motor vehicles, which it had proposed to do on September 15, 2009.

The stationary source provisions of the Act require permits for any pollutant “subject to regulation” under the Act. Sierra Club and other environmental groups have argued in a variety of individual permit cases that the Massachusetts case (declaring that CO₂ could be “subjected to regulation”) or some other, subsequent actions (e.g., the GHG reporting rules) have rendered GHGs “subject to regulation.” But, as former EPA Administrator Stephen Johnson explained in a December 18, 2008 interpretive memo, CO₂ will not be considered a “regulated pollutant” triggering CAA permitting requirements for stationary sources until such time that it is subject to a rule “that requires actual control of emissions of that pollutant.” In August 2009, Administrator Jackson stated that could occur when EPA finally promulgates CO₂ emission standards for motor vehicles, which it is expected to do by the end of March.

For about a year, a Sierra Club request for reconsideration of Administrator Johnson’s 2008 memo has been pending with EPA. As part of that reconsideration process, Administrator Jackson issued a notice requesting comments on various possible options for interpreting the phrase “subject to regulation.” 74 Fed. Reg. 51,535 (October 7, 2009). In her February 22, 2010, letter, Administrator Jackson states her expectation that when EPA finally acts on Sierra Club’s request, it will affirm Administrator Johnson’s interpretation and further clarify that CO₂ will not become “subject to regulation,” and therefore will not trigger CAA permitting requirements, until January 2011, when Model Year 2012 light-duty vehicles will first need to actually comply with EPA’s GHG emissions standards. And even then, the requirements will only apply to sources whose non-GHG emissions are greater than the preconstruction (PSD) and operating (Title V) permit programs’ statutory applicability thresholds. EPA’s current position that the date of the compulsion to comply with the rules setting GHG emissions standards for motor vehicles, rather than their date of promulgation, determines when CO₂ becomes “subject to regulation,” may be indicative of a growing recognition within EPA of the regulatory mayhem that will ensue on that day.

As we’ve discussed in a previous publication, the CAA drafters never envisioned GHGs being subject to the PSD and Title V permit programs, and so, not surprisingly, the problems with shoehorning GHGs into those programs are numerous and significant. Among the problems is that, at the statutory applicability thresholds, permitting authorities would receive approximately 40,000 PSD permit applications each year — they now receive around 300 — and they would need to issue Title V permits for around six million sources, as opposed to a current inventory of about 15,000. To deal with the resulting self-evident strains on the regulators and the regulated, on September 30, 2009, EPA proposed a rule to — in effect — “tailor” the CAA itself to raise the major source thresholds, for GHGs only, from 250 tpy to 25,000 tpy, to limit the universe of sources subject to GHG-triggered PSD and Title V review to a manageable level.

Now, in her letter, Administrator Jackson states her expectation that when EPA finalizes the tailoring rule, it will set a GHG threshold higher than the previously proposed 25,000 tpy, delay the CAA permitting requirements for those sources that would not trigger the requirements but for their GHG emissions until some time in the latter half of 2011, and delay the CAA permitting requirements for smallest sources until 2016, at the earliest. This proposed further “tailoring” of statutory requirements will most assuredly be the subject of legal challenges.

Finally, in response to the senators’ inquiry, Administrator Jackson acknowledges that a Senate resolution of disapproval of EPA’s endangerment finding, would, if adopted, prevent EPA from issuing its GHG standards for light-duty vehicles. Left unstated by Administrator Jackson is that, by preventing EPA from regulating GHG emissions from light-duty vehicles, Senate Joint Resolution 26 would also save stationary sources from having to authorize their GHG emissions under the CAA, a requirement that, at least under all of EPA’s prior interpretations, is not triggered until there is some actual regulation of GHG emissions under the CAA.

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