Thursday, March 8, 2012

EPA Punts on Step 3 of "Tailoring Rule"

EPA's "tailoring rule" is currently under judicial review in the D.C. Circuit, which I expect to overturn the rule for taking too many liberties with the Clean Air Act. In fact, the whole purpose of the "tailoring rule" is to amend the Clean Air Act in order to better suit it for dealing with carbon dioxide emissions. Without the rule, the statute would require EPA to regulate many tens of thousands of sources at great cost (both in compliance and administration). To avoid such an undesirable outcome, and to focus the regulation on only the biggest sources of carbon dioxide emissions, the "tailoring rule" raises the threshold for regulation, that is, it increases the numerical emission limits (from those specified in the statute) that would qualify a source for regulation.

The "tailoring rule" takes effect in three steps. In Step 1 (Jan. 2, 2011 to June 30, 2011), the rule applies only to sources that already are subject to certain (prevention of significant deterioration) rules under the Act (for emissions other than carbon dioxide), and imposes Best Available Control Technology (BACT) requirements only on those sources that would emit 75 thousand tons per year (tpy) or more of carbon dioxide. In Step 2 (July 1, 2011 to June 30, 2013), the BACT requirements apply to all new facilities emitting at least 100 tpy of carbon dioxide. Step 2 is expected to add approximately 900 new sources a year to those subject to regulation  under the "tailoring rule." Finally, just today the EPA has published its proposed Step 3 regulation, which would take effect July 1, 2013. Anyone (like me) who was expecting Step 3 to toughen regulatory standards beyond Step 2 levels will be disappointed.

The newly proposed Step 3 standards would leave Step 2 limitations unchanged, but would reduce some regulatory burdens on emitters by allowing plants to meet requirements on a plant-wide basis, rather than at each discrete source of carbon emissions within a plant. This "streamlining" procedure is probably quite sensible, but the failure of EPA to expand the applicability of the carbon emissions controls, for instance by bringing in sources emitting at least 50 tpy of carbon dioxide, starting in mid-2013 is disappointing.

I confess I don't know the reasoning behind EPA's decision not to expand the reach of carbon emission controls in Step 3. I hope to see a regulatory impact statement (RIA) on the proposed regulation before too long. In the meantime, you can see the proposed rule here.

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