In a recent energy industry conference in Houston, EPA Region 6 Regional Administrator Dr. Al Armendariz and Bracewell & Giuliani partner Jeff Holmstead (who headed EPA’s Air Office under the Bush Administration) discussed EPA’s new greenhouse gas (GHG) permitting requirements. Perhaps not surprisingly, they expressed different views about the GHG permitting program and specifically about the uncertainty caused by the need for companies to go through an EPA-mandated permitting process before they can build a new facility or make a significant modification to an existing facility. This permitting process is designed, among other things, to determine what is the Best Available Control Technology (BACT) for controlling GHG emissions from the new or modified plants.

Armendariz admitted that, because this is a new requirement, there is some uncertainty, but he pointed out that some of the uncertainty surrounding BACT determinations stems from the fact that they will be state and project specific. This flexibility, he asserted, allows the permitting authority to adapt those requirements that make the most sense in a given situation. As a practical matter, Armendariz expects that simple energy efficiency improvements will constitute BACT in the majority of cases. He specified that BACT for GHG permits will not require fuel-switching as a rule. As for the GHG permit process in Texas, where EPA will be the permitting authority, he emphasized that EPA still prefers that the state be the permitting authority. Until Texas takes the necessary steps under state law to regulate GHGs, however, EPA Region 6 feels confident that it will be able to efficiently process permit applications in a “reasonable time” and, in most cases, meet or beat state permitting program timelines.

Holmstead was especially skeptical of this last statement and asserted that EPA’s role in the permitting process will cause significant permitting delays, especially for large energy projects. He noted that, because of EPA’s involvement, no permit can be issued until EPA goes through a separate process under the Endangered Species Act (ESA). He also noted that no final permit can be issued and no one can even start construction until an internal EPA review of the permit is conducted by EPA’s Environmental Appeals Board (EAB). According to Holmstead, the EAB process takes about a year on average after the end of the traditional permitting process — and it can take many years in some cases. He also questioned Armendariz’s assertion that the permitting process will not require fuel switching. He pointed to recent decisions by the EPA Administrator forcing coal-fired power plants to go back through the permitting process and consider switching to natural gas or an integrated gasification combined cycle (IGCC) facility to comply with BACT. He concluded that the new GHG permitting requirements will likely keep anyone from building a new energy facility in Texas for at least two years.