### MEMORANDUM UNITED STATES ENVIRONMENTAL PROTECTION AGENCY WASHINGTON. D.C. 20460

OF"ICE OF AIR AND RADIATION



### SUB.JECT: Next Steps a nd P r elimi nary Views on the Application of Clean A ir /\ct Permitting Program s to Greenhouse Gases Foll owing the Supreme Court' s Dec is ion in Utility Air Regulatory Group 1 ·. Environmental Protection Agency 

### FROM :

TO: Janet G. McCabe

. Acting Assistant Administrator Office of Air and Radiation Cynthia G iles. Assistant Administrato Office or Enforcement and Complianc Regional Adminis trators. Regions 1-10 On .lune 

### 23. 2014. the U nited States Supreme Court iss ued a decision address in g the application of stationary source permitting requirements to greenhouse gases (GHG ). U tilit y Air Regulator y Group (UA Ru ) v. Em·ironme111a/ Proteclivn Agenc y (EPA ) ( 1 o. 12-1146). The EPA actions at issue in the case included those generally known as the --Tailoring Rule

.. and the ··Timing Deci s ion:· In very brief s umm ary, the S upreme Court sa id that the EPA may not treat greenhouse gases as a n air pollutant for purposes of determinin g whether a source is a major so urce required to obtain a Prevention of S ignificant De terioration (PSD) o r ti tle V permit. T he Supreme C ourt also sa id that the EPA could continue to req uire that PSD permits. o therwise requ ired based o n em issions of conventional pollutants, contain li mitations on GHG em iss ions based on the application of Best Avai lable Control Technology (BACT). The EPA is continuing to examine the implications of the Supreme Courfs decision , including how the EPA will need l o revise its permitting regulations and related impacts to state programs. There will be further federa l court action to apply the decision, but we know that you, as well as o ur partner agenc ies in state, loca l and tribal governments, have questions regarding how the decision affects PSD and title V permitt ing requ irements in th e meantime

. Some of these questions have near term im pl ications, in particular tho se re lated to pending PSD a nd title V permitting actions. T he EPA intends to ac ti vely engage with stakeholders on time-sensitive actions, suc h as permit app li cations, state program submission s, and s tationary source con s truction that may no longer nee d to meet certain pe nTiitting requirements. The E PA is likely to take other steps in the longer term and to respond to furth e r court action in thi s case as needed.

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### 2 Pending further EPA engagement in the ongoingjudicial process before the District of Columbia Circuit 

### Court ofAppeals (D.C. Circuit) , the EPA plans to act cons istent "vith its understanding ofthe Supreme Court's decision. This memorandum has two parts . First. it explains how the EPA intends to proceed at this point with re spect to pe rmit applications for Tailoring Rule ''Step 2" so urces and PSD modifi cations that were previously classified as major based solely on GHG emissions (thu s requiring that the sources get perm its). Second. thi s memorandum provides preliminary guidance in re spo n se to several question s regard in g ongoing permitting requirements for '·anyway so urces.. and some add itional issues pertaining to permitting requirement s fo r "Step 

# r sources. We belie\'e that the statu s of pen ding permit applications and whether certain projects need to apply for PSD and title V permits in light o f the S upreme Court decision may be the most immedi ate questions. 1. Permit Applications for Sources and Modifications Previouslv C la ssi fied as "Major" Based Solely on Greenhouse Gas Emissions ("Step 2" Sources) In order to act consistent with its understanding of th e Supreme Court's deci s ion pending judicial action to effectuate the final decision, the EPA will no longer require PSD or title Y permits for Step 2 sources . More spec ifically, the EPA wi II no longer apply or enforce federal regulatory provisions or the EPAapproved PSD State Implementation Plan (S IP ) provisions that require a stati onary source to obtain a PSD permit if greenhouse gases are the only pollutan t (i) that the source emits o r has the potential to emi t above the major source thresholds, or (ii) for which there is a significant emissions increase and a s ignificant net emissions inc re ase from a modification (e.g

. , 40 CFR 52.2l(b)(49)(v)). Nor does the EPA intend to continue applying regulations that would require that states include in their SIP a requirement that suc h so urces obtain PSD permits. Similarly, the EPA will no longer apply or enforce federal regulatory provisions or provisions of the EPA-approved title V programs that require a stationary so urce to obtain a title V permit solely because the source emits or ha s the potential to emit greenhouse gases above the major so urce threshold s (e.g., the regulatory provi s ion re lating to GHG under the definition of

.. subject to regulation·· in 40 

### CFR 7 1. 2). T he EPA also does not intend to continue applying regulations that would require title Y programs submi tted for approval by the EPA to require that s uch sources obtain title V permits. T hu s, the EPA does not intend to continue proces s in g PSD or Title V permit application s for Step 2 so urces or require new app li cations for such permits in cases where the E PA is the permitting authority. In su mmary, in o rder to act consistently with its understanding of the Supreme Court" s decision pend ing judicial action to effectuate the final decision , the EPA , . viii not apply or enforce the following regulatory requirement s:

• Federal regulations or the EPA-approved PSD SIP provisions that require a stationary source to obtain a PSD permit if GHG are the on ly pollutant (i) that the so urce emits or has the potential to emit above the major source thresholds, or (ii) for which there is a significant emissions increase and a significant net emissions increase from a mo dification (e.g., 40 CF R 52.21 (b)(49)(v)). • Federal regulations or provisions in the EPA-approved title V programs that require a 

### stationary source to obtain a title V permit solel y because the source emits or has the potential to emit GI IG above the maj o r so urce threshold s.3
As discussed further below, we recommend that Regional Ot1ices confer with state, local and tribal permitting authorities and permit applicants to discuss how to handle permit applications pending with those agencies. 

### 2. Preliminarv EPA Views Regarding Other Questions Raised by 

### Supreme Court Decision The remainder of this memorandum is intended simply to provide a clear statement of the EPA's present understanding of the imp lications of the Supreme Court's decision on additional subjects regarding permitting requirements. T he following is not intended to represent a definitive or final statement by the agency on these issues. En fact, the EPA expects that some changes or refinements to the following guidance may result as the EPA examines these matters further in the course of judicial proceedings , discussions with stakeholders, and forthcoming action with respect to permit applications, issued permits, and approval of state programs. 1 Next Steps in the Legal Process Following the Supreme Court's Decision Additional steps have yet to occur in the U.S

. Courts to implement the Supreme Cou11 decision. Since no party requested reconsideration of the Supreme Court decision by the applicable deadline under Supreme Court rules, the EPA expects that the Supreme Court's decision will become final shortly. This w ill be the case as soon as the Supreme Court sends its decision down to the D

. C. Circuit for further proceedings. After this occurs, we expect that the D.C. Circuit will issue an order that leads to a process that identifies particular parts of the regulations adopted in the T ailoring Rule and earlier EPA regulations that the EPA must revise (remanding the regulations) or that are struck down (vacating the regulations). The EPA and the Department ofJustice expect to soon begin a process of consulting with the parties to the litigation regarding this step of the court process. PSD Construction Permit Requirements 

### Sources Triggering PSD Based on Pollutants Other Than GHG The Supreme Court upheld application of the BACT requirement to greenhouse gas emissions from new and modified sources that trigger PSD permitting obiigations on the basis of their emissions of air pollutants other than GHG (also known as "Step l " or "anyway sources"). In the EPA's current view, Step 1 sources remain subject to the PSD BACT requirement for GHG, as well as other pollutants , if they emit those pollutants at or above certain thresholds. With respect to ne\"-' " anyway sources," the EPA intends to continue applying the PSD BACT requirement to GHG emissions ifthe source emits or has the potential to emit 75,000 tons per year (tpy) or more of GHG on a carbon dioxide equivalent (C02e) basis. With respect to modified "anyway sources," the EPA intends to continue applying the PSD BACT requirements to GHG if both of the following circumstances are present: (I) the modification is otherwise subject to PSD for a pollutant other than GHG; (2) the modification results in a GHQ emissions increase and a net GHG emissions increase equal to or greater than 75 , 000 tpy C02 e and greater than zero on a mass basis.

1 Since it provides genera l guidance on these is sues, the remainder of this memorandum does not itself create any rights or impose any new obligations or prohibitions, and is not intended to be a basis for enforcement actions. The guidance that follows from this point may not be appropriate for all situations. and EPA retains the discretion to approach issues differently than recommended he r e in specific situa1ions that may arise.4
The part of the Supreme Court opinion that affirmed application of BACT to greenhouse gases at
" anyway sources ., also noted that the EPA may limit application of BACT to greenhouse gases to those situations where a permit applicant's source has the potential to emit GHG above a specified threshold (or 

### de minimis) level. The Supreme Court explained that the EPA would need to justify its 

### de minimis threshold on proper grounds

. In the meantime, to ensure compliance with the Clean Air Act at present, the EPA intends to continue applying BACT to GHG at " anyway sources " and proce ssing PSD permit applications for " anyway sources " using a 75,000 tpy C02e threshold to determine whether a permit must include a BACT limitation for greenhouse gases , pending further developments

. Such further developments may include action by the D.C. Circuit, input received by the EPA from stakeholders in connection with the court process, experience applying this approach in individual permitting actions , and further EPA action to consider whether to promulgate a 

### de minimis level and what level would be appropriate. Thus , for now, the EPA believes the best course of action with respect to " anyway s ources" is to continue applying existing regulations. Sources Triggering PSD Solel y Based on CTHCi Emissions Subject to the considerations discussed below , headquarters recommends that Regional Offices confer with state, local , and tribal permitting authorities and permit applicants to explore their plans to respond to the Supreme Court's decision. These conversations should examine whether, in light of the Supreme Court decision , there is flexibility under state, local and tribal laws to determine that Step 

### 2 sources no longer are required to obtain PSD permits prior to the completion of any actions to repeal or revi se such regulations to in light of the Supreme Court decision. The EPA understands that some states have provisions in their laws that may automatically modify state

- law permitting requirements based on the Supreme Court's decision. To the extent such provisions were approved by the EPA as part of a SIP , Regional Offices should encourage such states to contact the EPA to discuss implementation of those provisions. We do not read the Supreme Court decision to preclude states from retaining permitting requirements for sources of GHG emissions that apply independently under state law even where those requirements are no longer required under federal law

. Regional Offices should be mindful that even if the EP!\ is not requiring Step 2 sources to obtain a PSD permit under federal law, such sources li kely have a continuing obligation to obtain minor source construction permits under the applicable SIP as a result of their emissions of non-GHG pollutants

. Thus, we recommend discussing with state , local, and tribal permitting authorities and permit applicants , the feasibility of converting pending permit applications into minor source permit applications and proceeding on th at basis where appropriate. We plan to provide additional views in the future with respect to Step 

### 2 sources that have already obtained a PSD permit, but our general thinking at this time is that it may be appropriate to ultimately remove GHG BACT limitations from such permits and to convert such permits into minor source permits where this is feasible and minor source requirements remain applicable

. We encourage Re gional Offices to contact states to discuss their ability to proceed consistent with the outcome of the Supreme Court decision on individual permitting matters
.5
Title V Operating Permits While the EPA will no longer apply or enforce the requirement that a source obtain a titl e V permit solely because it emits or has the potential to emit greenhouse gases above major source thresho lds, the agency docs not read the Supreme Court decision to affect other grounds on which a title 

### V permit may be required or the applicable requirements that must be addressed in title V permits

. For example, the EPA c u rrently believes it is still appropriate for a title V permit to incorporate and assure compliance with greenhouse gas BACT li mits that remain applicable requirements under a PSD permit issued to a Step 1 "anyway source. ' · We recommend that Regional Offices confer with state, local, and tribal permitting authorities and permit applicants regarding their plans to respond to the Supreme Court's decision. These conversations should examine whether , in li ght ofthe Supreme Court decision , there is flexibility under state, local, and tri bal la\VS to determine that Step 2 sources are no longer required to obtain title V permits prior to the completion of any actions to repeal or revise such regulations in light ofthe Supreme Cour t decision. To the extent that any approved state, local or tribal title V p rograms have provisions in their laws that may automatically modify state, local or tribal-law permitting requirements based on the Supreme Court's decision, Regional Offices should encourage such permitting authorities to contact the EPA to discuss implementation 

### of those provisions. Similar to state-law construction permitting requirements , the Supreme Court decision does not preclude states from continuing to require that certain types of sources obtain operating perm its meeting requirements that apply independently under state law. Thus, we recommend that Regional Offices advise sources to consult with their individual permitting authorities regarding operating permit requirements after the Supreme Court ' s decision

. With respect to title V permits that have already been issued to Step 2 sources , we recommend that such sources consult with thei r title V permitting authority to determine the appropriate next steps based on the source ' s specific permitting situation

. Federal PSD and Title V Rules, SIP and State Title V Programs The Office of Air and Radiation (OAR) anticipates a need for the EPA to revise federal PSD and title V rules2 in light of the Supreme Court opinion. In addition, OAR anticipates that many S IP s and approved title V programs will be revised to effectuate the Supreme Court's decision. The timing and content of the EPA's actions with respect to the EPA regulations and state program approvals are expected to be informed by the forthcoming legal process before the D.C. C ircuit. The EPA plan s to consult with permitting authorities to determine the most efficient and least burdensome ways to accomplish any such revisions to state or tribal programs. 

### GHG 5- Year Studv In the Tailoring Rule, the EPA described next steps to include a study by April 2015 , referred to as the "5-year study," and a possible further regulatory action, referred to as "Step 4." OJ\R believes the results of the Supreme Court decision eliminate the need for the 5-year study. Thus , at this time, OAR is no longer working on the study, and we intend to inform states collecting data requested by the EPA for

2 The EPA is still evaluating the impl ications of the Supreme Cowt's decision. if any , on GHG Pl antwide Applicability Limitations which were fina li zed under Step 3 ofthe Tailo ri ng Rule.

### 6
that study that this data collection is no longer neces sar y. In addition. the EPA does not intend to take further action on Step 4. The EPA is , however , continuing to evaluate GHG permitting data as appropriate with regard to the possible development and justification of an appropriate GHG significance (or 

### ''de minimis") level for determining the application of PSD BACT requirements to GHG in permitting of " anyway sources." We expect that the information that states have submitted for the 5- ye ar study will be useful in that effort. Assessment of Biogenic Carbon Dioxide CC02) Emissions The Supreme Court ' s decision did not directly address the application ofPSD and title V permitting requirements to biogenic C02 emissions

. On July 12, 2013, the D.C. Circuit issued a decision (the Deferral decision) overturning the EPA regulation that deferred application of these permitting programs to biogenic C02 emissions (the Deferral Rule). 

### Center.for Biological Diversity v. EPA , 722 F

. 3d 421 (D.C. Cir. 2013 )

. However, the Deferral decision has not yet taken effect because some pa1ties have been waiting for the Supreme Court decision to determine whether to ask the D.C. Circuit to reconsider its ruling on the Deferral Rule. Furthermore. court actions against the Tailoring Rule remain pending by parties that contend that the Tailoring Ruic caused PSD and title V programs to apply to biogcnic greenhouse gas emissions. Notwithstanding these matters still pending in the courts, the Deferral Rule itself expired on its own terms on July 21, 2014. T he EPA·s work regarding the biogenic C0 2 assessment framework remains ongoing and is not directl y impacted by the Supreme Court>s decision

. Nonetheless , the EPA ' s cur rent view is that the Supreme Court ' s decision effectively narrows the scope of the biogenic C0 2 permitting is sues that remain for the EPA to address. This is because , as described above, the EPA will no longer apply or enforce regulatory provisions requiring PSD or title V permits for sources solely on the basis of their GHG emissions. Continuing our current approach , OAR recommends that Regional Offices consult with sources and permitting authorities on biomass related permitting questions as they arise

. 

### Conclusion We trust this information will be helpful as the EPA pursues next steps and await further developments before the U.S. Courts. Should you have questions generally concerning this memorandum, plea.se contact Juan Santiago, Associate Division Director of the Air Quality Policy Division, Office of Air Quality Planning and Standards at 

### santiago.juan @ epa.gov or 919-541-1084. Should you have questions generally concerning the enforcement specific aspects of this memorandum , please contact Apple Chapman, Associate Division Director, Air Enforcement Division , Office of Civil Enforcement at 

### chapman.apple @ epa.gov or 202-564-5666

.