INSIGHT: US EPA moves to regulate greenhouse gases

01 October 2009 17:57  [Source: ICIS news]

US industry sees new EPA rule as major roadblockBy Joe Kamalick

WASHINGTON (ICIS news)--The Obama administration is moving independently of Congress to regulate greenhouse gases (GHG) by US industry in a tactic in part meant to spur federal legislators into action - but the end-run strategy may turn against the White House.

The Environmental Protection Agency (EPA) said this week it will seek to regulate greenhouse gas (GHG) emissions by power plants and manufacturing facilities.

EPA administrator Lisa Jackson said the Obama administration is not waiting for Congress to enact a comprehensive climate change mandate, so the agency is proceeding on its own to begin regulating GHG emissions from utilities and major industries.

The agency said that under authority of the Clean Air Act (CAA) it soon will propose rules requiring large industrial facilities - those that emit 25,000 tonnes or more of GHG annually - to obtain new construction or modification permits from EPA.

The new rules are expected to go into effect by the second quarter of next year.

In order to obtain those permits to proceed with new construction or major improvements, facilities such as electric power stations, factories and refineries would have to demonstrate to EPA that they are installing the best available emissions control and energy efficiency technologies.

Presumably, if the agency did not approve a permit application, new facility construction or existing plant improvements would not be allowed to proceed.

The EPA said it estimates that its anticipated rulemaking on GHG emissions by major facilities likely will apply to 14,000 US power stations, refineries and factories.

The agency said it would set the emissions threshold at 25,000 tonnes annually in order to exempt from regulation farms, restaurants, other small businesses and facilities such as hospitals, schools and office buildings from the planned regulation.

However, the National Petrochemical & Refiners Association (NPRA) was quick to challenge the agency, saying that EPA lacks the legal authority to decide which facilities should be regulated and which should be exempted.

“The Clean Air Act stipulates unequivocally that the threshold to permit major sources is 250 tonnes for criteria pollutants,” said NPRA President Charlie Drevna.

“EPA lacks the legal authority to categorically exempt sources that exceed the Clean Air Act’s major source threshold from permitting requirements,” Drevna added.

Jeff Holmstead, an air quality attorney with the Washington, DC, law firm of Bracewell & Giuliani and a former top official at EPA, said the agency’s plans to regulate GHG emissions at fixed facilities are an effort to “fit a square peg into a round hole”.

Holmstead suggested that the Obama administration is using proposed EPA regulation of facility emissions to pressure Congress into passing comprehensive climate change and emissions legislation before the end of this year.

“The Clean Air Act was not designed or intended to regulate CO2, but the Obama administration has already announced that it plans to start using the Act to regulate CO2 early next year unless Congress passes climate change legislation before then,” he said.

Holmstead noted that the Clean Air Act specifically states that any facility emitting more than 250 tonnes annually of a regulated pollutant is a “major source” subject to EPA action.

If EPA is to regulate GHG emissions of fixed facilities, Holmstead said, the 250-tonne threshold should apply, meaning that “more than a million buildings, including schools, churches and hospitals” would have to be regulated.

“EPA is trying to fix this problem simply by changing the 250 tonnes number to 25,000 tonnes,” he said, adding: “Normally, it takes an act of Congress to change the words of a statute enacted by Congress”.

The US Chamber of Commerce warned that the EPA’s proposed regulations will put costly roadblocks in the way of US industrial development just as the nation is struggling to sustain and expand recovery from recession.

As have others, the chamber contends that the EPA effort to limit its regulation of fixed facilities to major sources “rests on shaky legal ground” because the Clean Air Act sets the regulatory threshold at 250 tonnes annually - no exception.

The EPA, said chamber senior vice president Bill Kovacs, likely will face lawsuits by environmental groups and others challenging the agency’s arbitrary re-set of the threshold to 25,000 tonnes. The agency, said Kovacs, “may have to regulate all small businesses should some environmental groups prevail in likely lawsuits”.

Citing EPA’s own figures, the chamber says that the costs of applying for the required EPA construction or modification permits can run to $250,000 (€170,000), a cost that most small or even medium-size businesses could ill afford.

Other sources point out that while the EPA may require that new or modified utilities, factories or plants install the best available emissions technologies and energy efficiencies, no one knows what technologies the agency may require - or even if they exist.

The technology for carbon capture and sequestration (CCS), for example, is still being researched, is not proven and in any event will not be ready for broad commercial application by the second quarter of next year.

If the White House and administrator Jackson are only using this regulatory proposal as a scare tactic - hoping to stampede US industry into supporting and accelerating congressional action on climate change - they may be overplaying their hand, perhaps at great cost to the US economy.

At this point, it seems very unlikely that Congress will be able to complete work this year or even early next year on a major, complex and controversial climate change bill. There is strong opposition, even among Senate Democrats, to a cap-and-trade mandate that everyone concedes will raise energy and fuel costs significantly for US consumers and industry alike.

So if Congress fails to pass a cap-and-trade climate bill, EPA will be left holding the emissions regulation bag, like it or not.

Having declared its authority to regulate greenhouse gases across the land, the agency will be obliged to proceed. 

Environmental groups - some of whom have termed the new Senate climate change bill “woefully inadequate” - will use the courts to prod EPA forward at spear-point, forcing the agency to regulate the emissions of virtually every commercial facility and public structure larger than a corner hot-dog stand.

It could bring US industrial growth to a screeching halt.

($1 = €0.68)

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Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
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