On July 3, 2012, the U.S. Environmental Protection Agency published its final rule implementing the last phase of the Agency's three-phase "Tailoring Rule" approach to regulating greenhouse gas emissions from new and modified stationary sources under the Clean Air Act. In the final rule, EPA retained the permitting thresholds for greenhouse gases that were established in Steps 1 and 2 of the Tailoring Rule and authorized the use of plantwide applicability limits ("PALs") to streamline the permitting process for industrial facilities.

The current applicability thresholds, established under Step 2 of the Tailoring Rule, went into effect on July 1, 2011. Under these thresholds, new and existing facilities with potential carbon dioxide equivalent ("CO2e") emissions above 100,000 tons per year must obtain Title V operating permits. New facilities with potential CO2e emissions of at least 100,000 tons per year and existing facilities with potential CO2e emissions of at least 100,000 tons per year making modifications that increase their potential CO2e emissions by at least 75,000 tons per year must obtain a "prevention of significant deterioration" ("PSD") permit, which requires implementation of the "best available control technology" for emissions of greenhouse gases and other regulated air pollutants. Facilities triggering PSD permit requirements due to emissions of other regulated air pollutants must also address any potential CO2e emissions increases of 75,000 tons or more in the PSD permit.

In its proposal for Phase 3 of the Tailoring Rule, EPA considered whether smaller sources of greenhouse gases should be regulated. EPA ultimately decided not to regulate such sources because the Agency determined that state air permitting authorities have not had sufficient time to develop the infrastructure or expertise to handle additional permitting demands that would be created by covering these sources.

In addition to maintaining the existing regulatory thresholds, the final rule streamlines the permitting process by allowing the use of PALs for industrial facilities. Permitting authorities may issue greenhouse gas PALs on either a mass basis or a CO2e basis, and PALs, rather than specific emission points, can be used to determine whether a project should be deemed a major modification that subjects the facility's greenhouse gas emissions to regulation. This has the effect of allowing sources that utilize PALs to make changes without triggering PSD permitting requirements as long as overall emissions do not increase above the limit established by the PAL.

The final rule becomes effective on August 13, 2012.