On Wednesday, November 10, EPA released its much-anticipated and later-than-expected PSD and Title V Permitting Guidance for Greenhouse Gases. EPA’s BACT (Best Available Control Technology) Guidance, as the document is also known, is intended to assist states in implementing Prevention of Significant Deterioration (PSD) and Title V permitting requirements for greenhouse gases (GHGs). While the Guidance does gives businesses some idea of how GHG regulation will be incorporated into the BACT process, much remains unknown. Given the case-by-case nature of the BACT determination and the discretion of state regulatory agencies, regulated entities must prepare for additional uncertainty and delay in the permitting process.
Beginning January 2, 2011, new and major modified sources that are already subject to PSD and Title V due to other pollutant emissions (what the BACT Guidance calls “anyway sources”) and that have the potential to emit or increase GHG emissions in the amount of 75,000 tons per year (tpy) of carbon dioxide equivalent (CO2e) will be required to implement BACT for GHGs. On July 1, 2011, new and major modified sources with the potential to emit or increase GHG emissions in the amount of 100,000 tpy of CO2e will become subject to PSD and Title V permitting based on GHG emissions alone, thus triggering BACT requirements.
Focus on Energy Efficiency
EPA’s BACT Guidance does not define any specific technology or method as BACT for GHGs. Overall, the Guidance stresses the importance of energy efficiency as a key factor in reducing GHG emissions. EPA states, “We expect many permits issued after January 2, 2011, to initially place more of an emphasis on energy efficiency, given the role it plays in affecting emissions of GHGs.” To measure energy efficiency, the Guidance recommends performance benchmarking, including the use of EPA’s ENERGY STAR program.
The Nuts and Bolts
Traditional BACT Plus GHG.
The Guidance advises the continued use of the five-step “top-down” BACT analysis employed for traditional air pollutants. Under this analytical process, regulatory agencies (1) identify all available control technologies, (2) eliminate technically infeasible options, (3) rank remaining control technologies, (4) evaluate most effective controls (including consideration of economic, energy, and environmental impacts) and document results, and (5) select the BACT.
The BACT Guidance identifies “GHG-Specific Considerations” for each step of the BACT selection process. EPA classifies into three groups the world of technologies and methods that should be initially considered under BACT step one:
- Inherently Lower-Emitting Processes/Practices/Designs
- Add-on Controls
- Combinations of Inherently Lower Emitting Processes/Practices/Designs and Add-on Controls.
While the lengthy Guidance cannot be fully encapsulated here, a few key points of relevance for the regulated industry should be highlighted.
- Types of Energy Efficiency Measures. The Guidance identifies two categories of energy-efficient options that should be considered under the BACT analysis:
- (1) Technologies or processes that maximize the efficiency of the individual emissions unit (e.g., operating a boiler at supercritical or ultra-supercritical steam pressure vs. subcritical steam pressure); and
- (2) Options that reduce emissions from a new facility “by improving the utilization of thermal energy and electricity that is generated and used on site.” This category is intended to encompass overall process and design elements that impact facility-wide energy utilization.
- Carbon Capture and Storage Technology (CCS). The Guidance classifies CCS as an “add-on pollution control technology” that should be included in the BACT step-one analysis for large GHG emitters. Regarding BACT step two, however, EPA states that while CCS is a “promising technology,” the agency “does not believe that at this time CCS will be a technically feasible option in certain cases” due to its significant “logistical hurdles” (e.g., offsite land acquisition, site development). Further, even if CCS is not eliminated under BACT step two, EPA “recognizes that at present CCS is an expensive technology” that will frequently be eliminated under step four based on a lack of cost-effectiveness. It should be noted, however, that the Guidance does not rule out the possibility that a regulatory agency could impose CCS as a permitting requirement in certain cases.
- Fuel-Switching. The Guidance states, “The application of BACT to GHGs does not affect the discretion of a permitting authority to exclude options that would fundamentally redefine a proposed source. BACT should generally not be applied to regulate the applicant’s purpose or objective for the proposed facility.” Nonetheless, EPA has left plenty of room for play on this issue, further opining that the Clean Air Act does not prohibit options fundamentally redefining the source (e.g., requiring coal-fired power plants to switch to natural gas) and allows “permitting authorities to conduct a broader BACT analysis if they desire.” Additionally, EPA suggests that increased justification for excluding source-redefining options may be required where there has been significant public comment on the issue.
- Innovative Technology Waivers. In general, innovative technology waivers allow a source that implements an innovative control technology, as defined under applicable regulations, to have an extended period of time in which to bring the innovative technology into compliance with the required performance level. Under the Guidance, PSD and Title V permit applicants will be allowed to propose innovative technologies for controlling GHG emissions. EPA states that it may allow multiple facilities to be granted a waiver for the same innovative technology.
Prepare for Uncertainty
January 2, 2011 heralds not only the dawn of a new year but also the start of a new and untried stage in PSD and Title V permitting. Companies must be prepared to determine whether they will be subject to GHG regulation, and if so, how their facilities and processes will be affected. While EPA’s BACT Guidance provides some insights in this regard, the practical play-out and timing effects of the new requirements remain unseen and largely in the control of state regulatory agencies.
This Client Alert has been prepared by Lewis and Roca LLP for informational purposes only and is not legal advice. Readers should seek professional legal advice on matters involving these issues.