Update on Climate Change-Related Regulatory Developments

In April, EPA proposed a Mandatory GHG Reporting Rule to collect information from a substantial portion of sources creating  GHG emissions, while limiting the impact on small businesses and generating data that will be useful in establishing GHG mitigation policies (such as cap-and-trade legislation).  On August 19, the draft final rule was submitted to the Office of Management and Budget for review on August 19th.  EPA anticipates rule promulgation in October or November. 
 
Last month, EPA sent to the White House draft rules that would impose the first federal tailpipe standards for GHG emissions from vehicles.  The ability to regulate GHG emissions from vehicles is contingent on the finalization of EPA's proposed "endangerment finding" for GHG emissions from vehicles, which would establish GHG as regulated pollutants under the Clean Air Act (CAA).  However, this endangerment finding would have significant implications outside of the transportation sector as well. 
 
For example, the CAA currently subjects new and modified industrial sources to Prevention of Significant Deterioration (PSD) permitting when the source emits at least 250 tons per year of a regulated air pollutant.  If CO2 is considered a regulated pollutant under the CAA, then an industrial source would trigger PSD permitting if a project increases CO2 emissions by 250 tons per year.  To put this into perspective, it should be noted that EPA's proposed Mandatory GHG Reporting Rule will require facilities with at least 25,000 metric tons of CO2 equivalent emissions (CO2e) to report annual GHG emissions.  Based on the current language of the CAA and the anticipated endangerment finding, a new facility with 1% of this GHG emission rate would trigger PSD permitting.
 
In order to shield small sources from burdensome permitting requirements resulting from the anticipated endangerment finding, EPA sent a draft rule to the White House Office of Management and Budget (OMB) that proposes to limit strict air permitting requirements under the CAA (e.g., PSD, Title V) to industrial sources of more than 25,000 tons CO2e per year.  This draft, entitled "Prevention of Significant Deterioration/Title V Greenhouse Gas Tailoring Rule," represents the first time that EPA will attempt to modify the 250 ton threshold stipulated in the CAA.  Concern has already been expressed over EPA's legal authority to modify this threshold; however, this proposal is seen as a critical component of the practical regulation of GHG under the CAA.