As part of its continuing effort to address climate change, the Environmental Protection Agency has published yet more final rules to limit greenhouse gas emissions, this time focusing on heavy emitting industrial facilities.
The final rule (all 515 pages of it) requires facilities that release at least 75,000 tons of greenhouse gasses annually to obtain construction and operating permits covering those emissions. That new threshold is a kinder, gentler approach than the 25,000-ton threshold first proposed by the EPA in September.
In response to roughly 450,000 comment letters it received, the EPA agreed to set the threshold higher so the permitting requirement would not be imposed on unintended targets such as small businesses and farms. The final rule applies only to the largest emitters—power plants, oil refineries, or cement and steel production facilities, for example—that are responsible for nearly 70 percent of U.S. greenhouse gas emissions.
Moyer
But don’t let the threshold fool you, experts say. “It’s very important to remember this is just the beginning,” says Craig Moyer, head of the environmental and energy practice at law firm Manatt, Phelps and Phillips. “History shows that after plucking the low-hanging fruit, the EPA will seek further regulation of smaller sources.”
Even the EPA itself says it will next consider whether to regulate sources that emit less than 50,000 tons of greenhouse gasses per year—although such sources would not be regulated until 2016, if at all, the EPA said.
Sarni
For now, at least, the EPA is taking a “sensible approach,” says William Sarni, CEO of sustainability consulting company Domani. By excluding small emitters, “I think it’s a smart, practical next step.”
To alleviate compliance burdens, the EPA will roll out the requirements in a two-phase process. In the first phase, only facilities that already obtain Clean Air Act permits for other “priority” pollutants will be required to obtain permits for greenhouse gases, if those emissions increase by at least 75,000 tons per year. The EPA estimates that about 15,000 of the affected sites already participate in the Clean Air Act’s air operating permit program.
Beginning in January 2011, those permits would need to demonstrate the use of best available control technologies and energy efficiency measures to minimize greenhouse gas emissions when the facilities are built or overhauled.
Those first-phase rules aren’t bad news “if a company is smart about it,” says David Gardiner, president of Gardiner & Associates, a consulting and research firm focusing on energy and climate strategies. In fact, they could offer companies “significant opportunities,” he says. “It may be that people save money doing energy efficiency, rather than having it cost money.”
The American Iron and Steel Institute, which represents companies in the North American steel industry, doesn’t see it that way. “Despite the proposed tailoring of the statutory requirements, the EPA’s proposed regulation of stationary sources will discourage new investment and impose significant new costs on manufacturing industries,” Thomas Gibson, president and CEO of the AISI, said in a prepared statement.
The second phase presents additional challenges, particularly for plants or other buildings newly emitting greenhouse gasses. Beginning in July 2011, the rule will expand to include all new facilities that emit more than 100,000 tons per year, or existing facilities that make alterations or repairs that would increase their greenhouse gas emissions by at least 75,000 tons per year, even if they emit no other priority pollutant.
“This rule treats biomass fuels identically to fossil fuels, in effect undermining the Administration’s support for renewable energy policy in this country.”
—Donna Harman,
President and CEO,
AF&PA
The practical effect of that, Moyers says, is that launching new facilities that emit large amounts of greenhouse gasses will be “much more difficult.”
Under these new emissions thresholds, the EPA figures that roughly 900 additional permitting actions covering new facilities and modifications to existing ones would be subject to review each year. In addition, 550 facilities will be new to the program—such as solid waste landfills and industrial manufacturers.
The end result is that companies operating large industrial facilities will face a wide range of environmental reporting rules. Environmental consulting firms will be one way to navigate those compliance challenges, but companies can take their own steps as well. “In a lot of ways, this is classic risk management,” Sarni says. “What are the potential regulations? What are the scenarios? What are the costs? And how do I prepare for that and manage it?”
Challenges Ahead
The biggest controversy in all of these regulatory efforts, by far, has been the EPA moving ahead with regulating greenhouse gases under the Clean Air Act. Critics say that was never the intent of the law, passed in 1990 when global warming and climate change were much less pressing worries.
“I think almost every industry sector will agree that they’d rather have Congress pass something to address greenhouse gases than have it regulated by the EPA under the Clean Air Act,” Sarni says.
EPA TIMELINE
Source: Environomental Protection Agency.
The National Petrochemical and Refiners Association is one such industry that has blasted the EPA for its “unlawful” actions. “It’s the job of federal agencies like EPA to regulate, not legislate,” NPRA General Counsel Gregory Scott said in a prepared statement.
Another industry group, the American Forest & Paper Association, also stated its objections to the rule, because it fails to differentiate power generated by biomass as opposed to fossil fuels. Historically, emissions from biomass have not been included in greenhouse gas reduction policies, since biomass combustion does not increase carbon in the atmosphere when the overall biomass stock is renewed.
Harman
“We are deeply disappointed the EPA failed to reaffirm its own precedent and the internationally recognized carbon neutrality of biomass,” AF&PA President and CEO Donna Harman said. “This rule treats biomass fuels identically to fossil fuels, in effect undermining the Administration’s support for renewable energy policy in this country.”
The EPA, however, says it will solicit public comment on this issue separately. “I think there will be some modifications, certainly with bio-fuels possibly being exempt,” Sarni says.
Congress is also moving to pre-empt the EPA. In its most recent effort, the Senate on May 12 introduced another comprehensive climate and energy bill that would expressly prohibit the EPA from regulating greenhouse gases under the provisions of the Clean Air Act. It also would establish a cap-and-trade program for the utilities industry and provide incentives for renewable and nuclear power, among other provisions.
But as with similar efforts in the past, passage is unlikely, experts say. Legislation to address climate change has failed to move forward in Washington before, and now Congress is likely to keep itself busy with financial legislation, immigration reform, and the nomination of Elena Kagan to the Supreme Court, before heading into bitterly partisan elections this November.
“I think it’s pretty uncertain what the outcome here will be,” Gardiner says. “At the moment, I would say it seems more possible that there would be EPA regulation than there would a new Act from Congress.”
Sarni agrees. “I think EPA is going to stay on track,” he says. “If that forces Congress to act, that’s great, but regardless EPA is going to do what they’re going to do. I see that as very healthy tension, because we desperately need that to make sure we get something in place.”
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