December 04, 2008

Environmental Appeals Board Tees Up Carbon Dioxide Issue to Obama Administration

Posted on December 4, 2008 by Stephen M. Bruckner

In a decision that will have far-reaching implications for coal-fired power plants, EPA’s Environmental Appeals Board (“EAB”) ruled on November 14, 2008 that EPA’s Region 8 must reconsider whether carbon dioxide (“CO2“) is a regulated air pollutant covered by the Clear Air Act’s Prevention of Significant Deterioration (“PSD”) permitting program. Because there is so little time left for EPA to finalize its decision, the EAB’s ruling effectively drops this hot button issue squarely on the doorstep of the incoming Obama administration.

            The procedural posture of this case is a bit unusual. Deseret Power Electric Cooperative (“Deseret”) operates a coal-fired power plant, the Bonanza Power Plant, on the Uintah and Ourah Indian Reservation in Utah. Deseret wants to build a new waste-coal-fired plant at the same location. The new plant needs a “PSD permit” to regulate its emissions under the Clean Air Act. A PSD permit requires the installation of “Best Available Control Technology”, or “BACT”, for regulated pollutants.

            Most PSD permits are issued by state environmental agencies. However, because Deseret’s power plant is located on an Indian reservation, EPA’s Region 8 is the permitting authority. EPA issued the PSD permit to Deseret on August 30, 2007. The Sierra Club, which had submitted comments to EPA on the proposed permit, appealed the permitting decision to the Environmental Appeals Board. Sierra Club argued that the permit violated the Clean Air Act because the Act requires BACT for each pollutant “subject to regulation” under the Act. [Clean Air Act §§ 165(a)(4), 168(3); 42 U.S.C. §§ 7475(a)(4), 7478(3)].

            The EAB rejected the Sierra Club’s argument. The EAB carefully reviewed the Supreme Court’s landmark decision in Massachusetts v. EPA, 549 U.S. 497 (2007), which held that CO2 is within the Clean Air Act’s definition of “air pollutant”. The EAB noted that the Massachusetts decision did not address whether carbon dioxide is a pollutant “subject to regulation” under the Clean Air Act. The EAB therefore rejected the Sierra Club’s argument that the phrase “subject to regulation” has a plain meaning that requires Region 8 to establish a CO2 limit in Deseret’s permit.

            But that was pretty much the end of the good news for EPA and Deseret. In making its permit decision on CO2, EPA Region 8 relied on prior EPA interpretations addressing when a pollutant is considered to be “regulated”. The EAB ruled that the reasons cited by Region 8 for its decision were not sufficient. The EAB then sent the case back to Region 8 to ‘reconsider whether or not to impose a CO2 BACT limit in light of the Agency’s discretion to interpret, consistent with the CAA [Clean Air Act], what constitutes a “pollutant subject to regulation under the Act.”‘ [Deseret decision at p. 63]. Recognizing the potential impact of its ruling and of Region 8’s further consideration, the EAB observed that because the issue “has implications far beyond this individual permitting proceeding”, Region 8 should decide whether it would be better to address the matter in “an action of nationwide scope”. [Deseret decision, pp. 63-64].

            Clearly, then, the Sierra Club was denied the clear victory it sought; namely, to require BACT for carbon dioxide in all coal-fired power plant PSD permits. On the other hand, Deseret and other electric utilities seeking PSD permits are left hanging as to whether CO2 will be a regulated pollutant under the PSD program. Although EPA probably wants to resolve this case before the expiration of President Bush’s term, as a practical matter, it simply cannot get it done in little more than a month. Thus, the incoming Administration must squarely confront an issue that could shape the climate change debate and, ultimately, energy policy in this country. EPA most likely will take the hint from the EAB and handle the matter through “an action of nationwide scope”. How it turns out is anyone’s guess, but it is fair to say that the new EPA will have more climate change hawks in policy positions than the current Agency.

Tags: permitting


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