On February 3, 2010, California’s Bay Area Air Quality Management District (BAAQMD) approved issuance of the country’s first power plant permit to contain federally enforceable limits on emissions of greenhouse gases (GHGs).1 Pursuant to the Prevention of Significant Deterioration (PSD) provisions of Title I of the federal Clean Air Act (CAA), the permit was issued to Russell City Energy Center to construct a 600 megawatt natural gas fired combined cycle combustion turbine plant in Hayward, California.

In its response to public comments, BAAQMD emphasizes that the binding GHG limits imposedin the permit are not currently required by the PSD program under the CAA. However, in a letter to Senator Jay D. Rockefeller IV dated February 22. 2010, EPA Administrator Lisa Jackson stated that she expected EPA would begin to phase in permit requirements for GHG for large stationary sources during calendar 2011.2 Instead, the GHG limits imposed in the Russell City Energy Center permit were voluntarily requested by the permitee and incorporated into the permit as enforceable conditions. Because the U.S. Environmental Protection Agency (EPA) has not yet adopted regulations under the CAA for the control of GHGs from specific stationary sources, the Russell City Energy Center permit is likely to be regarded as a precedent for how GHGs might eventually be regulated for stationary sources under both the federal CAA and under state laws specifically targeting GHG emissions. In addition, as various agencies in California – including BAAQMD – grapple with how to address GHGs under the California Environmental Quality Act (CEQA), the state’s environmental review statute, these agencies are looking to any available examples of approaches to regulating GHGs. The binding limits and utilization of best available control technology (BACT) employed in the Russell City Energy Center PSD permit will likely be considered as a model for these agencies.

Background

Under the federal CAA, new and modified sources must obtain preconstruction permits for air emissions of regulated pollutants that exceed specified quantitative thresholds. Stationary sources subject to these permitting requirements must meet specified pollutant emissions control technology standards depending on the type of source, specific pollutant, and whether the area in which the source is located is, or is not, in compliance with the National Ambient Air Quality Standards (NAAQS) set by EPA for that pollutant. The PSD program addresses requirements for sources located in areas (“attainment areas”) that are in compliance with an applicable NAAQS or are not classifiable as to their status. Under its delegation agreement with EPA, BAAQMD is primarily responsible for issuing and modifying PSD permits within the San Francisco Bay Area Air Basin.

Like other PSD permits, the permit issued to Russell City Energy Center sets forth conditions relating to conventional pollutants for which the source triggers PSD thresholds. Among other requirements of the PSD program, regulated sources must install BACT to control emissions of PSD-regulated pollutants, and emissions limits specified for those pollutants are based on performance that can be achieved using that technology. For Russell City Energy Center, the permit contains BACT–derived standards for nitrous oxides (NOx, NO2), carbon monoxide (CO), and particulate matter (PM10, PM 2.5). However, unlike traditional PSD permits, as part of the multi-year process that resulted in issuance of the final PSD permit for the Russell City Energy Center,3 the permittee requested, and BAAQMD included, “enforceable BACT permit limits for greenhouse gas emissions as a condition for receiving a Federal PSD Permit.”4 This represents the first application of federally-enforceable GHG limits to the stationary source PSD permitting process.

BACT Analysis for GHG Emissions

Overview

Several public comments on the draft permit argued that BAAQMD either was obligated or ought to include permit conditions regulating GHG emissions from the Russell City plant under the CAA. The District disagreed. It summarized the various actions taken by EPA to date pointing out that “EPA is not requiring greenhouse gases to be regulated under the federal PSD permitting program, at least as of this time.”5 However, since the applicant voluntarily requested enforceable BACT limits for GHGs, the District concluded that “the issue is moot because the facility would satisfy all PSD requirements for greenhouse gases even if they were legally applicable at this time.”6

It appears that the suggestion of proceeding in this fashion to address the possibility of eventual GHG regulation under the federal PSD program may have originated with the District.7 But regardless of its genesis, the approach followed in the Russell City Energy Center permit provides a road map for large stationary sources concerned about the eventual regulation of GHGs and seeking some assurance that material technology investments that meet emission control requirements for conventional pollutants will not be called into question once subject to GHG regulation. To the extent that states seek independently to regulate GHGs in advance of any federal regulation, the Russell City Energy Center permit also may provide a precedent for seeking to impose a similar technology-based approach for stationary sources that are not subject to cap and trade. Already, a similar technology-based approach is being considered by at least one of California’s air districts struggling with how to approach stationary sources under CEQA.

Details of the BACT Analysis

The BACT analysis undertaken for GHGs in the Russell City Energy Center permit focused on fossil-fuel combustion technology for power plants. The result of the BACT analysis was an emphasis on efficiency: the only feasible control technology for reducing GHG emissions, the District concluded, was to employ the most efficient electrical generating technology. While certain comments argued that non-fossil fuel electrical generating technologies also should have been considered as part of the efficiency analysis, BAAQMD deferred on this point to the California Energy Commission, the licensing agency for the facility, as the agency best situated and legislatively authorized to make decisions concerning “the most appropriate mix of electrical generation sources.”8

The District also concluded that currently there were no feasible post combustion add-ons, pointing out that the application of carbon capture and sequestration (CCS) technology to natural gas combustion facilities was “still in its infancy,”9 and that for other reasons as well, this technology was not currently feasible for a large scale power generating facility. Accordingly, the analysis focused on the use of the selected turbines, which the District found to be 56.45 percent efficient and the most efficient option commercially available for a power plant of this size and type. Using this performance standard, the District then derived hourly, daily and annual emissions limits on CO2E for the turbines and associated heat recovery steam generators, as well as heat rate limits on each of the turbines. CO2E emissions limits were also imposed on the fire pump diesel engine and circuit breakers.10 Additional GHG requirements include an initial and annual heat rate performance test (turbines), leak detection alarms and response requirements for the circuit breakers, specified emissions factors for calculating GHG emissions from each regulated source, and detailed record keeping requirements.11

Conclusion

Although the binding GHG emission limits in the Russell City Energy Center permit were voluntarily imposed, the lack of approved approaches for regulating GHG emissions at stationary sources suggests that the permit is likely to serve as a model both for agencies looking to control GHG emissions and for permit applicants looking to avoid potential litigation or controversy over GHG emissions. However, many uncertainties remain as to precisely how EPA will regulate GHGs for stationary sources under the CAA and how technology-based standards for GHGs might interact with a federal (or a state or regional) GHG cap and trade program. The permit decision in Russell City Center demonstrates some of the challenges of using the CAA framework to control GHG emissions. For example, as discussed above, many questions were raised about the proper definition of BACT with respect to GHGs. As the debate over including CCS requirements, or using the PSD permit process as a vehicle for requiring alternative energy use demonstrates, how exactly to overlay the BACT framework on GHG regulation is not clear. Indeed, BAAQMD recognized the novelty of its chosen approach, and the absence of other BACT determinations for GHGs to look to for guidance.12

Additional uncertainties arise for new stationary source projects subject to environmental impact review under the National Environmental Policy Act (NEPA), or California’s CEQA. Responding to comments raised about the applicability of CEQA to the PSD permit process, BAAQMD declined to apply CEQA to the issuance of the federal PSD permit as it is not an action taken pursuant to California law, and instead deferred to the California Energy Commission’s already-completed CEQA-equivalent review process for the licensing of the Russell City Energy Center facility.13 BAAQMD also noted that EPA has made clear that NEPA is not applicable to PSD permits.14 However, as new licensing decisions occur, and both federal and California agencies make permitting decisions for significant stationary sources of GHG emissions, additional questions likely will arise with respect to the appropriate level of environmental review and GHG mitigation under NEPA and CEQA.