In a decision that will significantly impact efforts to require carbon capture and sequestration (“CCS”) as a control for carbon dioxide emissions from industrial facilities, EPA’s Environmental Appeals Board (“EAB”) rejected a challenge to a Clean Air Act Prevention of Significant Deterioration (“PSD”) permit for the construction of a new ethylene production unit in Baytown, Texas. The EAB upheld the permitting authority’s determination that the installation of CCS was too expensive, on a total cost basis, to be selected as the Best Available Control Technology (“BACT”) for limiting carbon dioxide emissions from the proposed unit.
EPA Region VI, the permitting authority authorized to issue PSD permits for greenhouse gas (“GHG”) emissions from stationary sources in Texas, issued a PSD permit to ExxonMobil Chemical Company to construct a new ethylene production unit as part of an expansion of its Baytown Olefins Plant. The Sierra Club petitioned for review of the PSD permit, arguing that the Region wrongly rejected CCS as a GHG control technology during Step 4 of its BACT analysis. The petition raised several issues regarding how permitting authorities consider the costs of pollution control technologies and what that means for the future of CCS as a control for industrial facilities.
Total Project Cost. Sierra Club claimed that permitting authorities may only consider the costs of pollution control technology on a cost-effectiveness basis, i.e., the
annualized cost of a particular control technology divided by the annual emission reductions it will produce. The EAB, however, upheld the Region’s determination that CCS was not economically viable for the new ethylene production unit on a total cost basis. It found that the estimated cost of CCS of $735.4 million was excessive, given that it would increase the cost of the building the unit by approximately 25%. Although the EAB acknowledged some general EPA guidance documents preferring a cost-effectiveness analysis, it found that EPA’s specific guidance on GHG BACT determinations identifies the high total cost of CCS as a potential basis for eliminating that technology from consideration – a position the EAB previously upheld in its City of Palmdale decision from September 2012. Here, the EAB found that the Region was entitled to credit the company’s assertion that the total cost of CCS, which would increase the cost of the unit by approximately 25%, would render the project economically unviable.
First-of-its-Kind Technology. Sierra Club argued that, if the Region did not compel the use of CCS, it would be impossible for CCS to ever become the BACT in the chemicals industry. Although the EAB expressed some sympathy for that argument, it observed that “CCS is still very much in its infancy” and its application to the low-concentration carbon dioxide exhaust streams produced by the ethylene production facility would involve first-of-its-kind technology. Notably, the EAB appeared to limit the import of EPA’s 1990 Draft NSR Manual, which was created at a time where “the Agency and states already had significant experience in establishing BACT for a variety of criteria pollutants in many industrial sectors.” Slip op. at 23. Unlike with CCS, the NSR Manual presumes a significant body of pre-existing information on cost-effectiveness and technological application.
The Cost Control Manual is Not Required for BACT Cost Estimates. Sierra Club had argued that the Region erroneously inflated the projected cost of installing and operating a CCS unit by including costs that are not authorized by EPA’s Cost Control Manual. The EPA rejected Sierra Club’s argument, finding that the Cost Control Manual is a non-binding guidance document and that permitting authorities need only consider the cost information in the record. It upheld the Region’s rationale that the Cost Control Manual, which was written before the regulation of GHGs from stationary sources, does not contemplate the costs of CCS, which have never been installed on an ethylene production facility before. Therefore, permitting authorities have discretion to use the best information on CCS costs that are available.
This decision comes at a time when EPA simultaneously is proposing utility New Source Performance Standards for GHGs that compel the use of CCS on any new coal fired power plant. Although EPA to date has limited its determination that CCS is adequately demonstrated technology specifically to coal electric generating units—and not other types of utility or other facilities—there likely will be ongoing efforts by advocacy groups and regulatory agencies to consider CCS as a control technology for a wider range of facilities over time. The EAB opinion should support decisions by permitting agencies to eliminate CCS during the BACT analysis when such decisions are adequately demonstrated in the record. At the same time, advocacy groups will likely continue to challenge permits arguing that CCS should be required based on circumstances relevant to individual permits or the evolution of the technology over time.