Yesterday, the EPA issued a final rule known as the "Tailoring Rule." The purpose of the Tailoring Rule is to mitigate the economic and permitting consequences that could otherwise flow from the joint EPA/DOT rulemaking that will limit GHG emissions from vehicles. Nonetheless, the Tailoring Rule is significant because, according to its terms, the largest stationary source GHG emitters in the nation—such as power plants, refineries, and cement production facilities—will have GHG reduction obligations beginning in 2011.

Under the Clean Air Act, Title V and PSD permitting requirements are triggered when a stationary source emits a pollutant "subject to regulation" in amounts exceeding certain thresholds. Per EPA, when the EPA/DOT vehicle GHG rule first requires vehicle manufacturers to limit vehicle GHG emissions on January 2, 2011, GHGs will be "subject to regulation" and, therefore, automatically trigger Title V and PSD for stationary sources of GHGs. Further, PSD requires subject facilities to use Best Available Control Technology (BACT) to reduce emissions of pollutants "subject to regulation."

In the absence of the Tailoring Rule, stationary sources would have permitting obligations if they have the potential to emit either 100 or 250 tons per year of GHGs, which could implicate small farms, restaurants, hospitals, hotels, and millions of other sources not thought of as subject to Clean Air Act regulation. The Tailoring Rule effectively exempts all but the largest GHG emitters from these regulatory impacts and should ease both compliance burdens and the cost to states of implementing the Title V and PSD programs.

Under the final Tailoring Rule, EPA will phase-in regulatory requirements. Step 1 runs from January 2, 2011, through June 30, 2011. During Step 1, a facility's GHG emissions will not be subject to reduction under PSD unless (1) the facility's non-GHG emissions independently trigger PSD and (2) the facility's PSD-triggering event will result in a GHG emission increase of 75,000 tons per year or more. Similarly, a facility will be subject to Title V permitting during Step 1 only if the facility's non-GHG emissions trigger Title V. That is, no stationary sources will be subject to Clean Air Act permitting requirements in Step 1 due to their GHG emissions alone.

Step 2 runs from July 1, 2011, though June 30, 2013. During Step 2, a facility's GHG emissions alone can trigger Title V and PSD permitting, but only at high thresholds. PSD will be triggered by new facilities with the potential to emit 100,000 tons of GHGs per year or more, as well as modifications to existing facilities that will increase the potential to emit by 75,000 tons of GHGs per year or more. Likewise, 100,000 tons per year or more of GHGs will be the triggering threshold for Title V permitting. EPA estimates that these thresholds will impact approximately 1,450 sources that would not otherwise be subject to Clean Air Act permitting requirements.

Naturally, Step 3 will follow Step 2, but it is unclear what Step 3 will be. Step 3 will be the subject of additional rulemaking, and EPA has committed that the lowest threshold at which GHG emissions could trigger permitting requirements under Step 3 will be 50,000 tons per year.