On April 2, 2007, the U.S. Supreme Court determined, in Massachusetts v. EPA, that greenhouse gasses fit within the Clean Air Act’s (“CAA”) definition of “air pollutant,” and that EPA had the authority to regulate the emission of these greenhouse gases.1 To date, the sole action taken by EPA regarding this judicially recognized authority is to issue, on July 11, 2008, an Advance Notice of Proposed Rulemaking seeking public comment on regulating greenhouse gas emissions under the CAA.2 States, and state courts, however, are giving indication of less reticence in directing that specific actions be taken in response to Massachusetts.

Georgia’s Friends of the Chattahoochee Case

One of the most potentially far-reaching actions was taken last month by the Superior Court of Fulton County, State of Georgia. In Friends of the Chattahoochee v. Georgia Department of Natural Resources, Docket No. 2008CV146398 (filed June 30, 2008), the Georgia Court determined, that in accordance with the findings of Massachusetts, carbon dioxide (“CO2”) is an air pollutant, and that the Georgia Department of Natural Resources (“DNR”) could not issue a permit to Longleaf Energy Associates (“Longleaf”) without CO2 emission limitations. This decision, if upheld, and widely adopted, would significantly impact the future of fossil-fuel fired steam electric plants, especially those that utilize coal as their primary fuel source.

The Chattahoochee decision came about as a Petition for Judicial Review of the decision by the States’ Administrative Law Judge (“ALJ”). The ALJ had upheld the action of the DNR in issuing a permit to Longleaf to construct and operate a 1200 megawatt coal-fired power plant in Early County. This plant was expected to annually emit eight to nine million tons of carbon dioxide. The court vacated the decision of the ALJ and remanded.

The reviewing court made two significant rulings related to greenhouse gases and regulation under the CAA. The court first found that (1) CO2 was a pollutant “subject to regulation” under the Act; (2) it was a regulated New Source Review (“NSR”) pollutant; and (3) that a Best Available Control Technology (“BACT”) analysis and emission limitation is required for CO2. The court also found that under the BACT statute and regulations, Longleaf was required to perform a complete analysis of an alternate “fuel combustion technique” that would emit less CO2, although at a much higher cost. The sourt also found for the petitioners on several state law questions.

The case in question hinged on whether CO2 was a pollutant subject to regulation. If so, then under the CAA, Longleaf would be required to install BACT. The statute, at 42 U.S.C. § 7479(3), defines BACT as:

an emission limitation based on the maximum degree of reduction of each pollutant subject to regulation under this Act emitted from or which results from any major emitting facility, which the permitting authority, on a case-by-case basis, taking into account energy, environmental, and economic impacts and other costs, determines is achievable for such facility through application of production processes and available methods, systems, and techniques, including fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques for control of each such pollutant.

The court found that the Supreme Court, in the Massachusetts decision, had determined that CO2 was an “air pollutant” under the Act. (Chattahoochee, 2008Cv146398 at 7.) Longleaf contended that even if CO2 was a pollutant, the BACT requirement applied only to pollutants that are also capped or controlled by some other general limit. (Id.) The court rejected this argument based both upon the expansive language used by Congress in the BACT definition, and upon the EPA definition of a “regulated New Source Review (“NSR”) pollutant.”3 The EPA definition of a regulated NSR pollutant includes “any pollutant that otherwise is subject to regulation under the Act” (40 C.F.R. § 52.21(b)(50)(iv)).

The court found that the Georgia DNR cannot issue a PSD permit without CO2 emission limitations based on a BACT analysis. In its second ruling relating to the CAA, the Court determined that Longleaf must include in its BACT analysis the use of integrated gasification combined cycle (“IGCC”) technology. Longleaf’s proposed facility utilized a conventional boiler combusting coal to produce steam to drive the generators. IGCC technology converts coal to a gas, which is then burned to directly drive turbines and produce steam. The argument made by Longleaf, and accepted by the ALJ, was that the BACT analysis should focus only on the proposed boiler, and not the entire facility. (Chattahoochee, 2008Cv146398 at 13.) The ALJ ruled that IGCC would “redefine the air pollution source” so that that it was no longer a “major emitting facility,” and therefore IGCC technology analysis was not required. (Id.) The court rejected this interpretation and found that the BACT requirement applies to the emitting facility as a whole, the use of IGCC technology would not change the status of the Longleaf facility, and that BACT specifically requires analysis of “innovative fuel combustion techniques such as IGCC.” (Id. at 14)

Chattahoochee on Appeal

The Chattahoochee decision is being appealed, and may not stand. In particular, the requirement that Longleaf must comply with emission limitations based upon use of IGCC technology is not well supported. The BACT standard requires that the permitting authority take into account economic impacts and other costs in developing the appropriate limitation. In the case of IGCC technology, which is significantly more expensive than conventional coal combustion technology, the Georgia DNR would be well within its authority to determine that BACT limitations based upon IGCC technology would not be appropriate.

Chattahoochee as Possible Roadmap for GHG Challenges

This case is important for several reasons, including its use as a possible roadmap for other challengers to the absence of GHG controls in their respective states. Courts, as well, could find the decision helpful as a way to evaluate and implement the decision in Massachusetts. Finally, Chattahoochee serves as an object lesson regarding the results of federal agency, and congressional, relative inaction after the Supreme Court’s Massachusetts decision. Absent supportable EPA rulemaking, or legislative direction from Congress, the potential certainly exists for inconsistent state decision-making.4 Such inconsistency could greatly increase the complexity and difficulty of constructing new power plants and major emitting facilities.

The ruling in Chattahoochee also has implications for existing facilities. Modifications of existing facilities can trigger a requirement for a BACT analysis. Under the Chattahoochee ruling as it stands, an existing coal-fired power plant could potentially be required to convert to IGCC technology if it makes physical changes at the facility that constitute major modifications.

Potentially affected power plants, major emitting facilities, equipment and process manufacturers and suppliers, and others, should closely monitor state litigation, rulemaking and policy development, and administrative permit processes. Intervention or other forms of participation may be possible. Recognizing state decisionmaking trends can also be helpful in anticipating individual state actions and developing adequate responses.