U.S. EPA's GHG regulations take effect in 2011, amidst growing legal challenges

August 13, 2010

In April, Senators John Kerry, Joseph Lieberman and Lindsay Graham announced their intention to pass legislation pre-empting the Environmental Protection Agency’s (“EPA”) regulation of greenhouse gases. 

However, since the recent abandonment of a Congress Energy Bill, the EPA’s regulations for stationary sources of greenhouse gas (“GHG”) emissions and new standards for light-duty vehicles remain scheduled to take effect on January 2, 2011.

The vehicle rules will apply to new passenger cars, light-duty trucks, and medium-duty passenger vehicles from model years 2012 to 2016, and will require these vehicles to meet an estimated combined average emissions level of 250 grams of carbon dioxide per mile in model year 2016. Automakers may meet these standards through improvements in fuel economy or air conditioning systems.

The auto industry is not expected to mount significant challenges to these rules, as it is speculated that the terms of the regulation were negotiated when loans were committed to the auto industry from funds from The Emergency Economic Stabilization Act of 2008.

On the other hand, the EPA’s regulation for stationary sources has prompted various proposed Bills in Congress seeking to restrict the EPA’s ability to regulate GHGs, as well as court challenges, most notably a lawsuit mounted by Texas Governor Rick Perry in the U.S. Circuit Court of Appeals.

The EPA’s stationary source regulation will operate under the Clean Air Act’s New Source Review Prevention of Significant Deterioration (“PSD“) and Title V Operating Permit (“Title V“) programs. Under these programs, industrial stationary source emitters who produce emissions above a set threshold are required to determine the Best Available Control Technologies (“BACT”) to limit their emissions. 

Prior to the EPA’s Endangerment Finding that determined that six established GHGs are “air pollutants” as defined by the Clean Air Act, the PSD and Title V programs applied only to criteria pollutants like lead, sulphur dioxide and nitrogen dioxide. The emissions thresholds for criteria pollutants are 100 and 250 tonnes per year, depending on the pollutant. 

For GHGs, the EPA has “tailored” the thresholds to be 75,000 and 100,000 tonnes per year of CO2 equivalent, depending on whether the facility is a new construction application or an existing facility undergoing modifications. Additional conditions apply as the EPA’s regulation will be enacted in two phases: one phase starting in January 2 to June 30, 2011; and the next phase, from July 1, 2011 to June 30, 2013.

At the heart of Governor Perry’s challenge is that the EPA does not have the authority to “tailor” the emissions thresholds set by the Clean Air Act. Governor Perry has also stated that in January, Texas will not comply with the stationary source regulations. Nevertheless, the White House Office of Management and Budget is reviewing an EPA rule that would allow the agency to install federal implementation plans if States do not comply with the regulations.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

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