As the first of several “niche” articles analyzing the US Environmental Protection Agency’s (USEPA) “Prevention of Significant Deterioration (PSD) and Title V Permitting Guidance for Greenhouse Gases” (BACT guidance), this blog post takes a look at a specific Title V issue: Title V permitting for sources with pending Title V renewal applications not issued in draft before January 2, 2011 (“Renewal Sources”).

In the BACT Guidance, Some Things Were Expected

After reviewing the new BACT guidance and the reaction to it, most agree that it does not come as a surprise – for BACT, most expected a recommendation that states focus primarily on energy efficiency while still fully considering any new emerging technologies. We also expected a few other determinations. With regard to Title V, USEPA states that during the first six months of the Tailoring Rule, from January 2, 2011 to June 30, 2011 (“Step 1”), no sources will be subject to Title V permitting requirements solely on the basis of their greenhouse gas (GHG) emissions. Of course, sources that obtain a permit during this time period due to emissions of other pollutants will have to list any applicable PSD requirements for GHGs in their Title V permits. And beginning on July 1, 2011 (“Step 2”), all sources will have to obtain a Title V permit so long as they have the potential to emit 100,000 tons per year of carbon dioxide equivalent and 100 tons of GHGs on a mass basis (remember that sources have up to a year to apply for a Title V permit after commencing operations). Finally, USEPA reiterates that USEPA rules do not require sources to pay Title V fees based on GHG emissions.

Some Surprises in the BACT Guidance

A question is raised when an existing source, chugging along with no modifications, applies to for renewal of its Title V permit. What if the existing source submitted a renewal application, but has not been issued a renewed Title V permit and does not expect one before January 2, 2010. What provisos with regard to GHG emissions can USEPA insert into the draft permit once it is issued in Step 1?[1]

Absent state SIP revisions that address this issue, it appears the answer is none – but we caution that each renewal may require individual scrutiny. This is an issue not directly addressed by USEPA in the BACT guidance (or the Tailoring Rule, for that matter) – yet it is an area that affects the most sources (given the economy, there are certainly more renewals out there than new sources) and thus where the states (and sources) are desperately seeking guidance. It also appears that USEPA can not legally require a supplement to the application to include information regarding GHGs in Step 1.

USEPA’s failure to address GHG emissions in the permit renewal process is a surprise because the Tailoring Rule and the BACT Guidance both state that existing major sources that do nothing to change their operations will be subject to GHG regulation in Step 1 if the existing major source applies for, renews or revises its Title V permit. (Tailoring Rule, p. 54; BACT guidance p. 53 (emphasis added)).

USEPA has said that Title V generally does not add new pollution control requirements but does require that each permit contain all “applicable requirements” under the Clean Air Act for the Title V source. Further, USEPA states that after January 2, 2010, a source will need to supplement its Title V permit application to include (1) citation and description of any “applicable requirements” (as defined 40 CFR 70.2) for GHG; (2) any information pertaining to monitoring or compliance activities resulting from “applicable requirements” for GHGs; and (3) any other information “considered necessary to determine the applicability of, and impose, any applicable requirements of GHG.” BACT guidance, p. 54. In the case of a renewal source, there is a strong argument (outlined below) that none of these applies.

No BACT/PSD in a Renewal Permit

The question now becomes, what are “applicable requirements” pertaining to GHGs for a renewal source during Step 1? Note that BACT is not applicable to a renewal source since BACT by definition is only applied to new or modified sources. This is consistent with the definition of “applicable requirements” at 40 CFR 70.2 as well as consistent with historical application of the Clean Air Act. In 1977, existing sources, the ones already up and running in 1977 - even the large U.S. fleet of old coal power plants built in the ’40s, ‘50s, and ’60s - were not brought under New Source Review (which is where BACT comes from). They were “grandfathered,” and allowed to operate without a permit until the existing facility made a “major modification.”

No Mandatory GHG Reporting Requirements in Renewal Permit

USEPA also states specifically in the BACT guidance that GHG reporting requirements established under USEPA’s mandatory reporting rule for GHGs (40 CFR part 98) are currently not included in the definition of “applicable requirements” under 40 CFR 70.2, 71.2. Thus, USEPA concludes that the mandatory reporting requirements “do not need” to be included in the Title V permit. (BACT Guidance p. 54). Note, however, that USEPA understates the issue: to the extent these requirements are included by overzealous (or inattentive) permit issuers, they are subject to challenge for removal. Clever states may try to “back door” these requirements by including these mandatory reporting requirements in the state implementation plans (SIPs) approved by USEPA, since “applicable requirements “ for purposes of Title V includes “[a]ny …requirement provided for in the applicable implementation plan approved or promulgated by EPA… including any revisions to that plan promulgated in part 52 of this chapter” but inclusion on that level may be subject to challenge.

If There’s No BACT/PSD and No Mandatory Reporting, What’s Left?

In Step 1 of the Tailoring Rule, nothing. Renewal sources should be issued their renewal permits without having: (1) to supplement their permit application regarding GHGs; or (2) the permits themselves include any requirements pertaining to GHGs. Keep in mind, however, that the approach changes on July 2, 2011 (Step 2) – so we suggest you try to get your renewal applications issued in draft before then!