On May 7, 2015, EPA issued a direct final rule to amend the permit rescission provisions in the federal Prevention of Significant Deterioration (PSD) regulations at 40 CFR 52.21. The direct final rule will allow states and local permitting authorities to rescind PSD permits that were issued under Step 2 of the Greenhouse Gas (GHG) Tailoring Rule. 

Under Step 2 of the GHG Tailoring Rule, PSD permits were required for facilities that triggered PSD due solely to increases in GHG emissions of 100,000 tons per year or more. However, the U.S. Supreme Court issued a decision on June 23, 2014 in UARG v. EPA, 134 S.Ct. 2427 (2014) holding that EPA may not treat GHGs as an air pollutant for the specific purpose of determining whether a source is required to obtain a PSD or Title V permit solely on the basis of the significance of the GHG emissions. Accordingly, as a result of this Supreme Court decision, Step 2 sources that triggered PSD permitting requirements based solely on their GHG emissions are no longer required to hold a PSD permit. While EPA’s direct final rule does not rescind any previously issued Step 2 permits, the rule provides a regulatory mechanism for the permit issuing authority to rescind PSD Step 2 permits that were issued under the now invalidated regulations upon the request of the source. 

Note that the Supreme Court also held EPA could continue to require that PSD permitting address GHGs where a PSD permit is otherwise required based on emissions of conventional pollutants. These are PSD permitting requirements for GHGs under Step 1 of the Tailoring Rule for “anyway sources”. The GHG threshold for such sources is 75,000 tons per year under the Tailoring Rule. However, EPA is proceeding to develop a proposed rule to modify that regulatory significance level for “anyway sources”. It is not known whether EPA will set a significance threshold that is higher or lower than 75,000 tons per year of GHGs. Where GHGs along with other conventional pollutants are subject to PSD review for new major sources or major modifications, GHGs will be subject to BACT determinations.