Industry faces unprecedented environmental challenges in 2011 driven by EPA’s Clean Air Act regulatory initiatives over the last year. In particular, EPA has undertaken four rulemakings that impact the majority of large stationary sources in the United States. These four initiatives (the “Big Four”) relate to: 1) the quantification and reporting of greenhouse gas (GHG) emissions, 2) the permitting of GHG emissions, 3) increasing the stringency of ambient air quality standards, and 4) comprehensive emission control requirements for boilers and process heaters.
While the approximately 15,000 “major” stationary sources of air emissions will bear the majority of the burden associated with these new regulations, more than 200,000 smaller stationary sources (area sources) are also anticipated to be affected by these new rules. These new requirements will influence how and where industry expands operations and builds new capacity. In addition, many existing and new sources will be required to install additional air pollution control equipment to meet the standards. EPA estimates that costs to comply with these new regulations will exceed $20 billion over the next 10 years.
The new regulations dictate a mix of one time compliance requirements and ongoing periodic compliance activities. The majority of initial compliance requirements for these new regulations have deadlines between 2011 and 2014. However, industry will be dealing with lasting impacts of these regulations for decades. Based on the complexity and anticipated costs associated with these new regulations, organizations should develop a structured approach to compliance that is specific to their operations and future growth plans. This article discusses the elements of a structured approach that can be used by industry to comply with the new requirements and applies this approach to each of the Big Four initiatives.
GHG Emissions Reporting
The requirements to quantify GHG emissions from stationary sources are codified in EPA’s Mandatory Reporting of Greenhouse Gases rule (MRR) contained in 40 CFR Part 98. Approximately 10,000 facilities will be required to annually report under the MRR, comprising 85% of all stationary source GHG emissions in the U.S. The majority of facilities subjectto the MRR must begin submitting reports on March 31, 2011, covering the previous year’s annual emissions. For a complete list of industry sectors subject to regulation under the MRR, as well as the detailed technical requirements of rule, refer to Trinity’s Federal News Web page as well as EPA’s Web page.
Permitting of GHGs
Permitting of criteria air pollutants from stationary sources in the U.S. has been regulated for decades under the New Source Review (NSR) program and the Federal Operating Permits (Title V) program. The regulation of GHGs began on January 2, 2011 under EPA’s PSD and Title V GHG Tailoring Rule which incorporates GHG emissions in the two existing permitting programs. Organizations constructing or modifying stationary sources must evaluate the applicability of NSR to emissions of GHGs beginning in January 2011. Facilities that are major sources of GHG emissions, and not previously required to have a Title V permit for other criteria pollutants, must submit initial Title V permit applications by July 1, 2012. The Tailoring Rule is expected to subject 1,500 facilities per year to the NSR program for GHG emissions and result in 250 additional facilities requiring a Title V permit. For a detailed overview of the Tailoring Rule, refer to the following Trinity articles on the Tailoring Rule and EPA’s subsequent BACT guidance.
Air Quality Standards
EPA has promulgated new and updated National Ambient Air Quality Standards (NAAQS) over the last two years at the fastest pace in its 40 year history. These include new or revised standards for lead, nitrogen dioxide, sulfur dioxide, and proposed revisions to the ozone standard. These changes have far-reaching implications for industry, from more stringent air permitting requirements for new and modified sources to additional emissions controls for existing sources located in areas not meeting these new and more stringent air quality standards. Some of these new standards are already in effect, while others required additional time for states and local agencies to assess existing air quality in comparison to the standards. NAAQS apply across the U.S. and have potential implication to stationary sources of air emissions. The timeline for the implementation of these new standards, and requirements for compliance with the standards, stretch out over the next two decades. For more information, read Trinity’s articles on new SO2 standards and NO2 standards.
The CAA requires EPA to propose and promulgate national emissions standards for hazardous air pollutants (NESHAP) from stationary sources. The largest category of emission units regulated under the NESHAPs is boilers and process heaters. EPA proposed NESHAPs for boiler and process heaters at major sources as well as smaller sources in 2010. The rules are expected to be promulgated in 2011 or 2012, and will require the installation of additional pollution controls on over 10,000 units at major sources by 2015. An additional 200,000 units at minor sources will also be covered by the rules and will be subject to operational and recordkeeping requirements. For complete applicability and requirements contained in the proposed NESHAP, read the Trinity articles on the proposed Boiler MACT and related proposed solid waste definition.
Structured Approach to Compliance
Trinity recommends following a structured approach to minimize the impacts and costs associated with these four initiatives. Following this approach will lead to greater operational flexibility and potential competitive advantage in the marketplace. The recommended approach should contain the following six elements: 1) Strategy, 2) Advocacy, 3) Human Resources, 4) Project Planning, 5) Data Management, and 6) Compliance Scheduling. Each of these six elements is described in further detail below.
Step 1 - Strategy Development
In general, developing a strategy is the first step in a structured approach to compliance. Strategy consists of understanding the rule, the rule’s applicability to your organization’s facilities, and potential implications for operations. What are the available compliance options, and how will those options impact the future operational flexibility of your organization? Estimating initial and annual costs for each compliance option is key in evaluating the trade-offs between costs and flexibility. Involving engineering, plant operations, sales and marketing, and senior management in this step of the process is critical to success. Start early so that estimated costs can be included in long term projections and budgeting.
Step 2 - Advocacy
Where does the regulation currently stand in the rulemaking process, and what can your organization do to influence the requirements of the final regulation? All rules proposed by EPA are open to public notice and comment before finalization and promulgation. EPA must consider every comment received during the notice and comment period, prior to the issuance of final regulation, and frequently amends proposed rules based on input received. This is your opportunity, either as an organization or more broadly as part of an industry group, to ensure that the final regulation does not unfairly or disproportionately impact your business.
Step 3 - Human Resource Needs
The complexity and far-reaching nature of these four initiatives will require the involvement of multiple functions within your organization to effectively craft and execute a compliance plan. It is typically a plant or corporate environmental professional who has the responsibility of determining what areas of expertise are required and pulling together the team needed for the project. This includes both internal resources as well as external expertise. External experts can include equipment vendors, engineering and construction companies, consulting firms, and legal counsel.
Step 4 - Project Planning
Breaking the compliance requirements into discrete activities, assigning responsibilities, and building in contingencies are all part of the planning phase. Project planning is important for budgeting purposes and to ensure that adequate resources are in place to comply. Identifying which tasks can be completed in parallel, and which must be completed sequentially, allows for compression of the project schedule if timing becomes an issue.
Step 5 - Data Management
Given the large amount of data required to demonstrate initial and ongoing compliance with EPA’s newest regulations, determining your data management needs is increasingly important for environmental compliance. This includes data associated with initial stack testing, parametric monitoring, continuous emissions monitoring, data conversion and averaging, and all associated recording and reporting requirements contained in the regulation. Depending on the level of complexity, facilities often select and implement an off-the-shelf software solution or develop a customized solution to fit their specific needs. An early evaluation of data management options is necessary to ensure that the system is in place prior to the compliance deadline.
Step 6 - Compliance Scheduling
This step involves creating an organization’s roadmap for complying with the rule by the regulatory deadline. It brings together the other five elements of the approach into a chronological set of tasks with milestones and responsibilities clearly delineated. An organization’s environmental staff takes ownership of the development and execution of this document to drive the project to completion.
This structured approach can be applied to each of the four initiatives, although differing levels of effort and emphasis on the six elements will be required. The following highlights some of the key elements most critical to each of the four initiatives.
Mandatory Reporting Rule
With an initial submittal date of March 31, 2011, organizations should have already developed a compliance strategy for the MRR. The final rule has been promulgated, so there is little opportunity for further advocacy. Human resources should be identified, and a project team set in place. The remaining elements in a structured approach to compliance are data management and scheduling. What tools will your organization use to manage the data recorded in 2010, calculate GHG emissions, and upload that data into EPA’s electronic greenhouse gas reporting tool (e-GGRT)? That decision should be made at least two months prior to the reporting deadline to allow adequate time for system integration, testing, and populating the system with the required data for 2010 reporting.
Facilities that are considered major sources of GHG emissions, and are planning on modifying their operations within the next five years, must evaluate the applicability of the NSR program as defined in the Tailoring Rule. The regulation of GHG emissions under the NSR program has significant implications on the permitting of proposed projects, as the timeline associated with obtaining the necessary construction authority will likely by increased for projects subject to GHG NSR. As part of a forward-looking compliance strategy, organizations should incorporate applicability analyses and impact assessments into their business and financial evaluation of future projects. For those projects that are identified as likely triggering PSD review for GHGs, companies can follow the structured approach outlined in this article to efficiently and efficiently achieve compliance.
Organizations should also evaluate existing minor sources under the Title V program to determine if emissions of GHGs will affect their minor source status. For newly major Title V sources, organizations will have the option of either limiting emissions of GHGs below the major source threshold level and avoiding Title V permitting requirements or submitting the required initial Title V permit application by the July 2012 deadline. Strategic analyses should weigh the pros and cons of these two alternatives. Although the human resource, project planning, and data management aspects of compliance are relatively straightforward, companies that are affected by this rule will need to develop a compliance schedule and identify the resources for the preparation and submittal of any required permit applications by the required deadlines.
EPA’s recent push to promulgate more stringent air quality standards has far reaching consequences for industry. Organizations with facilities located in areas of the country that are projected not to attain these new standards (referred to as non-attainment areas) will face additional scrutiny in the years ahead. Local and state environmental agencies are required to develop plans to bring these non-attainment areas into attainment with the standards by a specific date. Emissions reductions from existing mobile as well as stationary sources within (and nearby) these non-attainment areas will likely be required to install controls to reduce emissions of pollutants contributing to the adverse conditions. Furthermore, construction of new facilities and the expansion of existing facilities in these non-attainment areas will be extremely difficult, requiring companies to purchase “emissions offsets” and overcome additional permitting hurdles in order to obtain authorization for construction. Companies may want to avoid building new facilities or expanding existing facilities in these areas, and instead focus on alternative locations in other parts of the country.
Organizations should begin developing strategies to minimize the impact of the new NAAQS on their existing operations. The first step involves identifying facilities located in projected non-attainment areas. This information is an important input into long term planning. For existing facilities located in projected non-attainment areas, organizations should closely work with local and state agencies as they craft regulations to reduce emissions from stationary sources. Affected facilities are often an integral part of the rulemaking process in non-attainment areas, including commenting on and/or assisting in the development of control strategies. If additional controls are required, organizations should follow a structured approach to ensuring that appropriate resources are secured, plans are developed, and a compliance schedule is in place to meet regulatory deadlines for their affected facilities.
Organizations should be focused on developing strategies for compliance with the Boiler MACT - assessing unit applicability, evaluating compliance options, and estimating compliance costs based on the 2010 proposed rule. The anticipated costs of the proposed Boiler MACT are over $10 billion, with the majority of those costs associated with additional emission control equipment on an estimated 13,500 existing units. That equates to approximately $700,000 in control equipment costs per affected unit. With an expected compliance deadline in 2014, and the final rule yet to be promulgated, organizations still have an opportunity to influence the rulemaking process. Although the public notice and comment period associated with the 2010 Boiler MACT proposal has closed, it is likely that the EPA will re-propose the rule due to the significant changes that are anticipated between the 2010 proposal and the final rule. Therefore, organizations affected by this rule may still have an opportunity to influence the scope and requirements of the final regulation.
Given the potential magnitude of this rule, early strategy development and project planning are essential to minimizing compliance costs. For facilities required to install control equipment, the resources required will be significant. Initial and on-going compliance with the regulation will involve the collection and processing of a large volume of information, necessitating the need for a sound data management system. The overall compliance effort should include robust scheduling to deal with potential contingencies such as equipment procurement and construction delays.
For these and any new regulations, a systematic approach is critical to analyze applicability, minimize costs of compliance, and maximize operational flexibiity.