In case there was any doubt after the recent watershed election, the times they are a-changin’. The U.S. Environmental Protection Agency (“EPA”) Environmental Appeals Board’s (“EAB”) recent ruling, In Re Deseret Power Electric Cooperative, could pave the way for EPA-imposed CO₂ emissions limits on power plants and other significant sources of CO₂ emissions. In response to a lawsuit filed by the Sierra Club over the EPA’s issuance of a permit authorizing the construction of a new coal generating unit near Bonanza, Utah, the EAB has ruled that the EPA must consider CO₂ emissions when determining whether to issue permits for new power plants. 

Background

The Clean Air Act (“CAA”) requires EPA to issue a prevention of significant deterioration (“PSD”) permit whenever a new major source of air pollution is constructed or when major modifications are made to an existing source in certain areas in the U.S. Among other requirements, PSD permits must consider a best available control technology (“BACT”) emissions standard for every pollutant that is “subject to regulation” under the CAA. As the name suggests, BACT is an emissions limit based on the highest achievable degree of control.

 

In 2004, Deseret Power Electric Cooperative (“Deseret”) applied for a PSD permit to build a new waste-coal-fired generating unit at its existing Bonanza Power Plant. Prior to EPA’s issuance of the permit, the Sierra Club filed comments before the EPA suggesting that Massachusetts v. EPA, which was then pending before the U.S. Supreme Court, could ultimately require EPA to impose a BACT emissions limit on the Deseret plant’s CO₂ emissions.

 

In its April 2007 decision in Massachusetts v. EPA, the Supreme Court held that CO₂ is an “air pollutant” under the CAA. A few months later, EPA issued the PSD permit authorizing Deseret to build the waste-coal-fired generating unit and stating that Massachusetts v. EPA did not require it to cap CO₂ emissions. Sierra Club filed a lawsuit arguing in part that EPA violated the CAA in issuing the permit because it did not require a BACT emissions limit for controlling CO₂ emissions. EPA countered that based on a historical agency interpretation, it did not have to impose a CO₂ BACT limit because CO₂ was not subject to any rules or regulations requiring actual control over such emissions.   

 

EAB Decision

 

The EAB explicitly stated that it did not determine that the CAA requires EPA to impose a BACT limit on CO₂ emissions. However, it rejected EPA’s reason for not imposing a CO₂ BACT limit as not supported by the record. As a result, it remanded the permit to EPA for it to “reconsider whether or not to impose a CO₂ BACT limit and to develop an adequate record for its decision.” Thus, the EAB’s decision compels EPA to consider CO₂ emissions when evaluating permits for power plants—both new and modified. Although EPA may ultimately decide not to impose a BACT limit, it must at the very least incorporate the BACT analysis into its permit deliberations. 

 

Implications

 

In the short term, the EAB decision will add uncertainty to the certification process for new coal plants, given the high concentrations of CO₂ in coal. This uncertainty is likely to continue until a national policy is adopted addressing CO₂ emissions. As the EAB noted, “[i]n remanding this permit to [EPA] for reconsideration of the CO₂ BACT issue, we recognize that the issue of whether CO₂ is ‘subject to regulation’ under [the Clean Air] Act’ is an issue of national scope and that all parties would be better served by addressing it in the context of an action of nationwide scope rather than in the context of a specific permit proceeding.”