Here's the issue: Certain larger emission sources of greenhouse gases (GHGs) will be subject to permitting requirements for planned construction projects starting January 2, 2011. In 13 states, the permitting programs (known as the Prevention of Significant Deterioration (PSD) permitting program) do not apply to sources of GHGs. Thus, emission sources in those states would be unable to obtain a PSD permit that covers GHG emissions, and would potentially be unable to undertake construction or modification projects on or after January 2, 2011. The states are Alaska, Arkansas, Connecticut, Florida, Idaho, Kansas, Oregon, Texas, and portions of California, Arizona, Kentucky, Nebraska, and Nevada.

Here's USEPA's proposed solution: The Agency recently proposed two rules that would fill the gap in the permitting programs for these 13 states: (1) the SIP call and (2) the FIP. Under the first proposed rule, the U.S. Environmental Protection Agency (USEPA) would issue a "SIP call," requiring the 13 states to revise their State Implementation Plans (SIPs). According to USEPA, the PSD program in these jurisdictions is "presumptively inadequate" because they do not allow for the regulation of GHG emissions. All other states would be required to review their rules and inform USEPA if they would not be able to issue PSD permits for greenhouse gas emissions.

Under the second rule, USEPA proposes to establish a FIP - a Federal Implementation Plan for the 13 "presumptive inadequate" states, and for any other state in which USEPA determines that the state PSD program does not meet requirements for regulation of GHGs. Only the states deemed by USEPA to be inadequate would need the federal plan. In other words, in any states that do not update their regulations within 12 months after USEPA signs the final action, the second proposed rule would give the Agency the authority to take over until the state can assume the responsibility.

What this might mean to regulated entities: A state that has to amend its rules, especially the 13 "presumptive inadequate" states, would likely have difficulty making the changes by USEPA's deadline, which is within 12 months after USEPA signs the final action. If USEPA steps in as planned, new sources and modification projects might be unusually delayed while USEPA works through the GHG portions of permitting applications.

What this might mean in Allegheny County and most California counties: It's hard to say. Allegheny County and most of the Air Quality Management Districts in California are in a "grey area" - that is, they are not listed on either the Presumptive SIP Call or the Presumptive Adequate Lists. USEPA has determined that these jurisdictions (among others) do not have an approved PSD SIP. See additional discussion below.

What's next: The two rules have not yet been formally proposed with publication in the Federal Register, and comments on the rules would be due 30 days after publication. USEPA has scheduled a public hearing on the matter for August 25, 2010 in Arlington, Virginia.

Some Details and Acronyms

Under the first proposed rule, the SIP call, USEPA is proposing a finding of SIP substantial inadequacy for only the 13 states mentioned above (again, the "Presumptive Sip Call List"). For the most part, in all other states USEPA is proposing a finding of SIP substantial adequacy (the "Presumptive Adequate List"). If any of the Presumptive SIP Call List states are not in a position to submit to USEPA a corrective SIP revision within 12 months after USEPA signs the final action, USEPA will promulgate a FIP that will provide authority to issue PSD permits. USEPA intends to finalize the SIP call on or about December 1, 2010.

Nonetheless, for each of the presumptive adequate list states, USEPA is soliciting comments in the SIP call on whether their SIPs do or do not apply the PSD program to GHG sources. USEPA is not at this time proposing a FIP for the states on the "presumptive adequate" list. However, if EPA concludes after comment on the rule that a state's SIP does not apply to GHG sources, then USEPA will proceed to issue a finding of substantial inadequacy and a SIP call on the same schedule as the already-listed-as-presumptive-inadequate states. If a newly listed state is not able to submit to USEPA a SIP revision that applies the PSD program to GHG sources by the SIP call deadline, then USEPA proposes to promulgate a FIP for that state without further notice and comment. Thus, any state listed on the Presumptive Sip Call List (and any state that feels it might be added to such list after the comment period) should consider the comment period for the SIP call notice to be their opportunity to comment on the FIP as well.

Unlisted Jurisdictions: Inter alia, Allegheny County, Pennsylvania and Several California Counties

Again, the 13 states with "presumptive inadequate" SIPs are Alaska, Arizona, Arkansas, California, Connecticut, Florida, Idaho, Kansas, Kentucky, Nebraska, Nevada, Oregon and Texas. All other states for the most part are on the "presumptive adequate" list - which means they should not expect a SIP call unless USEPA decides to the contrary at the close of the comment period on the SIP call notice.

There are several unlisted jurisdictions. An example of this is Pennsylvania. Pennsylvania is on the presumptive adequate list (the list of states that appear to apply PSD to GHG sources). However, USEPA specifically excepted solely Allegheny County from the Presumptive Adequate List when listing Pennsylvania. In addition, Allegheny County, Pennsylvania, does not appear on the Presumptive SIP Call list. According to USEPA, the Agency has determined that Allegheny County (among others) does not have an approved PSD SIP. USEPA has determined that in Allegheny County, the applicable regulatory authority is USEPA's regulations, found at 40 CFR 52.21, and presumably has determined that no changes need to be made to apply PSD to GHG sources. It is worth noting that the docket record reflects that USEPA made this determination without input from Allegheny County, according to USEPA sources. This could be because Allegheny County did not respond to a 60-day letter request from USEPA regarding adequacy under the Tailoring Rule. Allegheny County may not have made a determination internally whether its air regulations require revision to apply PSD to GHG sources. There is only USEPA unchallenged assertion at this point. Thus it is still not clear whether Allegheny County air regulations require revision - that is, whether conflicting provisions create ambiguity within Allegheny County air regulation as to whether it applies to GHGs. If USEPA's conclusion remains unchallenged, sources in Allegheny County can expect the proposed FIP (that is, the provisions of 40 CFR 52.21 limited solely to GHGs) to apply to PSD permitting after January 2, 2011 in accordance with the Tailoring Rule and its phased-in approach.

Another example of unlisted jurisdictions is California. Four California Air Quality Management Districts (AQMD) appear on the Presumptive Adequate list (Mendocino, Monterey Bay Unified, North Coast Unified, and Northern Sonoma County). One California AQMD appears on the Presumptive Sip Call List (Sacramento Metropolitan). All other AQMDs in California are unlisted - presumably because USEPA has determined that these jurisdictions (among others) do not have an approved PSD SIP. This means that sources commenting on the USEPA proposed action have localized interests - that is, comments on and objections to USEPA's proposed action may vary from site to site. Companies with multiple facilities in California should coordinate responses carefully.