The EPA’s rules came about after the U.S. Supreme Court ruled in 2007 that GHG emissions could be considered air pollutants under the federal Clean Air Act (CAA), and the EPA must either regulate these emissions or provide a basis for not regulating GHGs consistent with the CAA. While the EPA under the Bush administration did not issue new regulations, the agency under the Obama administration has issued regulations requiring power plants, refineries and other large sources of emissions to obtain permits and to reduce emissions. These rules have been called the “Tailoring Rule” as they are designed to address the largest sources first and over the next few years address smaller sources.

Since most states have been delegated by the EPA the ability to implement the federal CAA permitting program, the EPA has adopted guidance and series of rules to guide states in implementing GHG regulations. States that do not follow these approaches will face the EPA taking over the program and issuing a second permit that addresses GHG emissions while the state issues a permit to govern emissions of more traditional air pollutants. The EPA has taken this step in Texas and plans to issue a GHG permit in addition to the state’s permit. The D.C. Circuit Court of Appeals has stayed the EPA’s action until briefing on the motion to stay can be filed and the court can consider the arguments. Those states that follow EPA regulations will issue a single permit governing both traditional emissions and GHG emissions.

The major issue in developing a permit for a large source of GHG emissions is determining what control methods will be used to reduce emissions. This is the most critical decision in terms of cost and impact on the facility. The EPA or the state must select what is known as the Best Available Control Technology (BACT), which takes into account environmental and economic impacts.

The EPA has issued documents to provide guidance to states or EPA regions in selecting a technology to reduce emissions from sources that must obtain a permit for a new facility or an existing one undergoing a major modification.  

For coal-fired power plants, the first type of technology that may be considered is fuel switching, such as from coal to natural gas or biomass. The EPA has taken the position that fuel switching in most cases would not be required. The reason would be that it would be a major change in the facility proposed to be constructed.  

Another potential control method in the EPA guidance is carbon capture and storage (CCS). This has been considered an expensive approach for most power plants. The guidance provides CCS has three elements:  capture of carbon dioxide, transportation and storage. If any of these is not feasible, then CCS need not be considered. The EPA said CCS could be ruled out where space for carbon dioxide capture equipment at an existing facility is not available, where right-of-ways cannot be obtained to build a pipeline or access cannot be obtained to an existing carbon dioxide pipeline, or where access to suitable geologic reservoirs for sequestration or other storage options are not available. CCS and other technologies may also be eliminated if they are determined to be too expensive.

The last major area discussed is energy efficiency. For power plants, this may mean installing more efficient burners or other changes that increase energy efficiency. The EPA has indicated that energy efficiency will be the most likely technology required for most facilities that obtain GHG permits.

Control technologies will be the main concern for any facility regulated under the EPA’s rules. This decision by a permitting authority may be challenged in court by the facility owner or environmental groups. This litigation may produce court decisions as to how control technologies must be selected by environmental agencies.

Recently, the EPA announced, in settling cases brought by environmental groups it will develop specific regulations governing technologies that must be used at power plants and refineries to reduce GHG emissions. These regulations will likely be issued in 2011 and be challenged in court.

As states and the EPA make decisions about control technologies to reduce greenhouse gases, the Court of Appeals in Washington, D.C., and probably the Supreme Court will hear challenges as to the legality of the EPA’s regulations.  

Other areas of uncertainty exist. States such as California and 10 northeastern states have adopted their own climate change laws that may conflict with EPA regulations. It is not clear how these conflicts would be resolved. At the same time, Congress could act in the next few years to delay or take away the EPA’s power to regulate GHG emissions. While the current president would likely veto these bills, Congress may seek to remove funding for the EPA to implement its GHG regulatory program.     

At this time, it appears the initial phase of the EPA’s GHG regulations will go into effect for the coming months, and may continue for at least the next two years. Large emitters of GHGs may be required to obtain permits for these emissions and be required to install technologies to reduce them. However, future elections may change the course of the EPA’s GHG regulatory program. The longer course of the federal regulation of GHGs remains uncertain, but in the short run it appears that major sources may have to reduce their emissions. Patton Boggs energy, mining and environmental teams will continue to participate in these developments on behalf of its client and report new developments in its articles and newsletters.

Savit is a partner in the Denver office of Patton Boggs LLP. He can be reached at 303-894-6117 or at msavit@pattonboggs.com. Deatherage is a partner in the firm’s Dallas office and can be reached at 214-758-1539 or sdeatherage@pattonboggs.com.