Greenhouse Gas Air Permitting Update 2014
Greenhouse gases (GHG) have been regulated under the Clean Air Act since 2010, following a 2007 Supreme Court decision and an “endangerment finding” by the U.S. EPA. The primary GHG is carbon dioxide (CO2) but a total of six different gases are grouped under the definition of GHG including methane, nitrous oxide, and various fluorine containing compounds. The question “What is your carbon footprint” must be answered accurately by industrial sources to determine potential GHG federal reporting and air permitting obligations. In 2014, changes will occur to the federal Part 98 GHG reporting and accounting requirements. In addition, GHG permitting requirements are expected to change in 2014 as a result of an industry challenge to the EPA’s GHG permitting rule being considered by the Supreme Court, and as a result of a D.C Circuit Court of Appeals decision and the July 2014 end of EPA’s 3-year deferral of GHG permitting for “biogenic” CO2 sources like wood-fired boilers, landfills, and wastewater treatment plants.
Federal Part 98 GHG Reporting
Large GHG sources like electric utilities and cement plants have been reporting their GHG emissions under the federal Part 98 GHG reporting program since 2010. Facilities that emit more than 25,000 metric tons per year of GHG emissions are subject to Part 98 reporting and must report electronically using EPA’s electronic GHG reporting tool, e-GGRT. EPA has made several revisions to the Part 98 reporting rules over the past three years and has recently (November 2013) made further revisions to the rule that are expected to require additional sources to report their GHG emissions. One notable change is that EPA is revising the “global warming potentials” (GWP) for certain GHG gases including methane. Because each GHG gas has a different greenhouse “potency” compared to CO2, the GWP factors are multiplied by the emission rates (in tons/year) for each gas to compute total GHG emissions on a “CO2 equivalent” (CO2e) basis. For example, methane is a much more potent GHG than CO2, and EPA’s revisions to the GWP values will have the effect of increasing total calculated GHG emissions for methane emissions sources like landfills effective in 2014.
EPA’s Tailoring Rule for Permitting Large GHG Sources
Large sources of GHG emissions are also subject to federal Prevention of Significant Deterioration (PSD) air permitting requirements under the EPA’s “Tailoring Rule” which came into effect in 2011. The Tailoring Rule established much higher emissions thresholds for GHG emissions (e.g., 100,000 tons/year compared to the PSD thresholds of 100/250 tons/year for criteria pollutants like VOC, NOx, and SO2). EPA reasoned that it was necessary to “tailor” the PSD thresholds established in the Clean Air Act to avoid the “absurd results” that would result from requiring federal air permits for hundreds of thousands of sources like schools and apartment buildings that would result if the PSD thresholds were applied to GHG emissions. Under the Tailoring Rule, major sources of GHG emissions (e.g., new power plants) or major modifications to existing major GHG sources must obtain PSD permits and must demonstrate that GHG emissions meet Best Available Control Technology (BACT) requirements. Because CO2 capture and control options (e.g., sequestration) have not been demonstrated to be technically and economically feasible, most of the CO2e BACT determinations made to-date have essentially been based on equipment efficiency considerations. For example, BACT limits have been imposed on a “lb CO2e per unit output” or “lb CO2e per MW” basis for manufacturing plants and power plants, respectively.
The Tailoring Rule has been challenged by the electric utility industry, manufacturers, and several States in the Utility Air Regulatory Group (UARG) v. EPA case. The Supreme Court heard arguments in this case on February 24, 2014 and appeared skeptical of EPA’s rationale for “tailoring” the Clean Air Act in order to require permits for large sources of GHG emissions. It appears that Justice Anthony Kennedy will be the swing vote in deciding for or against EPA in this case. Justice Kennedy was in the majority when the Court ruled 5-4 in 2007 that GHG are classified as an “air pollutant” and that EPA has the authority to regulate GHG under the Clean Air Act.
Deferral of GHG Permitting for Biogenic CO2 Sources
EPA deferred applicability of the Tailoring Rule to “biogenic” sources of CO2 for a 3-year period in July 2011, reasoning that CO2 emissions from biomass combustion are “carbon neutral” in that trees and crops that are harvested are eventually re-planted and the new biomass absorbs CO2 as it grows. The biogenic deferral applies to CO2 emissions from both biomass combustion (e.g., biomass power plants, wood-fired boilers) and to CO2 generated from biological decomposition in landfills, wastewater treatment plants, manure management processes, and CO2 from fermentation processes (e.g., wine and beer making). During the 3-year deferral, which ends in July 2014, EPA is conducting a detailed examination of the science and accounting of biogenic CO2 emissions and the “carbon cycle”. It is expected that EPA will issue a biogenic CO2 accounting framework that will exempt some or all of the biogenic CO2 depending on the type of process and feedstock. For example, CO2 emissions associated with combustion of “sustainably harvested” biomass might be fully exempted.
However, on July 12, 2013, the U.S. Court of Appeals for the District of Columbia vacated the EPA’s deferral of biogenic CO2 emissions, ruling that EPA did not have the authority under the Clean Air Act to treat biogenic CO2 emissions differently from CO2 emissions from fossil fuel combustion. In response to the biomass industry’s request that the deadline to appeal this ruling be extended, the Court ruled in November 2013 that the appeal deadline would be extended until the Supreme Court issues their opinion in the UARG v. EPA case.
As a result of these legal developments, we can expect significant changes to how biogenic CO2 emissions need to be reported and assessed with regard to air permitting later in 2014. The EPA will complete their biogenic CO2 review and issue guidelines in July 2014 and the Supreme Court will rule as to the legality of the Tailoring Rule in the same time frame.
Liberty Environmental assists clients evaluate their carbon footprints and develop GHG emissions inventories. We have extensive experience with GHG emissions reporting programs, developing GHG reduction strategies, and assisting clients navigate the changes to the federal GHG reporting and permitting programs.
Article Written by Gavin Biebuyck, Principal.