On December 18, 2008, the Environmental Protection Agency (“EPA”) issued a memorandum clarifying its interpretation of the scope of the EPA regulation that determines which pollutants are subject to the Clean Air Act’s (the “Act”) federal Prevention of Significant Deterioration (“PSD”) permitting program. Under the Act, preconstruction permits are required in the PSD permitting program for any new major stationary source or modified existing major stationary source of regulated air pollutants located in an area that is either attaining the National Ambient Air Quality Standards for the subject pollutant or is unclassifiable. This aspect of the permitting program is called new source review, or simply NSR. Only newly constructed or modified major sources that emit one or more “regulated NSR pollutants,” which includes “any pollutant that otherwise is subject to regulations under the Act,” are covered by the requirements of the PSD permitting program. PSD permitting program requirements include installation of the best available control technology for those regulated NSR pollutants that the facility emits in significant amounts. The EPA’s memorandum is intended to resolve any ambiguity regarding the meaning of “regulated NSR pollutants,” as the term is defined in EPA’s regulations.  

The EPA’s memorandum is intended to answer questions that have arisen from the November 13, 2008, decision of the EPA Environmental Appeals Board (the “Board”) in In re: Deseret Power Electric Cooperative, PSD Appeal No. 07-03 (EAB Nov. 13, 2008). In the Deseret decision, the Board remanded a permit issued by Region 8 authorizing Deseret Power Electric Cooperative (“Deseret”) to construct a new waste-coal-fired electric generating unit in Utah. The unit is anticipated to release carbon dioxide (“CO2”) emissions that the power plant will be required to monitor and report, but, under the proposed permit, will not control or otherwise limit. The Board concluded that the Act’s language and its corresponding regulations are unclear as to whether CO2 emissions should be treated as a regulated NSR pollutant. The Board also concluded that the administrative record for the permit proceedings did not adequately support EPA’s determination that CO2 was not subject to regulation under the PSD permitting program. Accordingly, the Board sent the permit proceeding back to EPA to decide whether CO2 was a regulated pollutant under the PSD permitting program and then better document the rationale for EPA’s decision. The Board’s decision in Deseret has led to widespread concern among numerous industries about not only which emitted substances could trigger permit requirements under the PSD permitting program, but also which sources may constitute a “major stationary source” that would be regulated under the PSD permitting program. Either a 100-tons-per-year or a 250-tons-per-year threshold determines major stationary source status, depending upon the type of source at issue. Given that many light industrial, commercial, and even municipal or multiresidential facilities generate CO2 in quantities greater than 250 tons per year, EPA’s determination could have had significant and broad effects.  

Understanding the potential national consequences of EPA’s decision on the issues, the Board had advised EPA to consider seeking meaningful public comment and input on its determination of whether CO2 was a regulated pollutant for PSD permitting purposes. EPA declined to seek such formal input. Instead, with EPA’s recently issued memorandum, EPA interprets the definition of “regulated NSR pollutant” to exclude pollutants for which EPA regulations require monitoring or reporting, but only if the pollutant is not otherwise subject to either a provision in the Act or regulation promulgated by the EPA under the Act that requires actual control of emissions of that pollutant. According to EPA, this interpretation was based on the language of the regulations, consistent with past EPA practice, and not precluded by the Act. Additionally, the EPA concluded that such interpretation would prevent an unsound policy of triggering emissions limitations under the PSD permitting program on the basis of rules designed solely for information gathering purposes. In its memorandum, the EPA requested that each EPA Region and each delegated State that issues permits on behalf of EPA immediately implement EPA’s interpretation. The EPA also encouraged Regional

Administrators to apply the interpretation prospectively, but not retroactively, when reviewing and approving new submissions for approval of State Implementation Plans. Within the context of Deseret and other PSD permitting proceedings, implementation of this interpretation almost certainly will be contested by environmental advocacy groups. Further, it will be interesting to see whether a new administration’s EPA will address this issue consistently with the memorandum.