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EPA Issues Final Tailoring Rule to Regulate Greenhouse Gases

Yesterday, the U.S. Environmental Protection Agency (EPA) announced a final rule to address greenhouse gas (GHG) emissions from the largest stationary sources of GHGs(the so called "tailoring rule"). The requirements of this final rule would be phased-in starting in January of 2011.

In January of 2011, facilities that obtain a Clean Air Act permit for other pollutants will be required to include GHGs in their permit if they increase GHG emissions by at least 75,000 tons per year ("tpy"). In July 2011, Clean Air Act permitting requirements will be expanded to cover all new facilities with GHG emissions of at least 100,000 tpy and modifications at existing facilities that would increase GHG emissions by at least 75,000 tpy. These permits must demonstrate the use of best available control technologies to minimize GHG emission increases when facilities are constructed or significantly modified.

The emission requirements set out in the final rule are lower than the requirements in the October 2009 proposed rule, which would have applied to facilities emitting greater than 25,000 tpy. The decrease in the threshold levels in the final rule is likely the result of political opposition EPA has received to the regulation of GHGs. For example, a bill has also been introduced by Sen. Lisa Murkowski (R-Alaska) that would effectively veto EPA's ability to move forward with any climate regulations.

This final rule was issued one day after Sen. John Kerry (D-Mass) and Sen. Joe Lieberman (I-Conn.) introduced a cap-and-trade bill that aims to curb carbon dioxide emissions. This proposed bill would limit EPA's authority to regulate greenhouse gases under the Clean Air Act.

EPA estimates that under this new rule, approximately 900 additional permitting actions covering new sources and modifications to existing sources would be subject to review each year. In addition, 550 sources will need to obtain operating permits for the first time because of their GHG emissions.

Next year, EPA expects plans to begin another rule-making process to phase in more permits and determine whether some smaller sources of emissions can permanently be excluded from the process.

If you have questions regarding this proposed rule and the impacts that it may have for your company, please contact Jeff Talbert, Steven Hudson, or David Van Slyke with Preti Flaherty's Climate Strategy Group.