Greenhouse gas limits reinforced at existing facilities; NSPS still a big concern

On July 3, the U.S. Environmental Protection Agency (EPA) announced that it will not revise greenhouse gas (GHG) permitting thresholds under the Clean Air Act. Through this final step, EPA decided that the overall applicability limits for GHG sources it presented through Step 1 and Step 2 of the GHG Tailoring Rule should be upheld.

The rule calls for new facilities with GHG emissions of at least 100,000 tons per year (tpy) carbon dioxide equivalent (CO2e) to continue to be required to obtain Prevention of Significant Deterioration (PSD) permits. Existing facilities that emit 100,000 tpy CO2e and make changes increasing the GHG emissions by at least 75,000 tpy of CO2e, must also obtain PSD permits.

This final rule – Step 3 of the Tailoring Rule – was at one time expected to be more stringent, said Kevin Desharnais, partner at Mayer Brown. At the time that Steps 1 and 2 were announced, he said, EPA had indicated that it would consider lowering the threshold in Step 3, “which would potentially bring in a much wider range of sources smaller than those regulated now.”

However, since EPA declined to lower the threshold, an influx of additional sources needed to be regulated is avoided for the time being, Desharnais said. “There is now certainty through 2016 as to which sources will be subject to regulation, and which modifications will trigger permitting requirements. This will allow sources to plan for the potential applicability when considering modifications, or constructing new facilities.”

While the Tailoring Rule reinforces greenhouse gas limits at existing coal-fired facilities, the recently proposed New Source Performance Standard (NSPS) threatens to limit greenhouse gases at new facilities. The limitations would be much stricter on new facilities than on existing – requiring any new power plant to emit no more than 1,000 pounds of CO2 per megawatt-hour. The average coal plant emits an average of 1,768 pounds of CO2/MWh.

Some in the power industry view the proposed rule greenhouse gas NSPS as an attack on coal generation. “By banning the future of efficient and effective coal in the United States, coal may instead by exported and used overseas,” said Scott Segal, executive director of the Electric Reliability Coordinating Council (ERCC).

Adam Kushner, partner at Hogan Lovell, said that having both a GHG tailoring rule and a GHG NSPS would be overkill. “Since the Tailoring Rule has been sustained, the need for NSPS has been diminished.”

EPA is still seeking additional comments on the proposed GHG NSPS through the end of July. Steve Fine, vice president of ICF International, said a final rule will likely come “later this year, presumably sometime after the election.”

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