EPA:

Long-delayed projects get exemption from new air, climate rules

The Obama administration will spare a stalled power plant project in California from the newest federal limits on greenhouse gases and conventional air pollution, U.S. EPA says in a new court filing that marks a policy shift in the face of industry groups and Republicans accusing the agency of holding up construction of large industrial facilities.

According to a declaration by air chief Gina McCarthy, officials reviewed EPA policies and decided it was appropriate to "grandfather" projects such as the Avenal Power Center, a proposed 600-megawatt power plant in the San Joaquin Valley, so they are exempted from rules such as new air quality standards for smog-forming nitrogen dioxide (NO2).

The shift also has implications for the Obama administration's climate program.

McCarthy's statement says the proposed Avenal plant will be exempt from "additional permitting requirements that have taken effect during the period of time these permit applications have been pending" -- which include new standards for sulfur dioxide (SO2) that were put in place last summer and the new greenhouse gas rules that took effect on Jan. 2.

With such an exemption, projects that have been in the permitting pipeline for years would no longer need to show that they are using the best available technology to control their greenhouse gas emissions.

"EPA will propose to extend similar relief to other permit applicants that can show they are similarly situated," says the filing in the U.S. District Court for the District of Columbia. "This determination represents a change in the position EPA has taken in this matter and in previous interpretive statements issued by EPA."

Industry groups had argued that EPA's previous policy was unfair because it changed the rules after businesses applied for permits. When they claimed the agency's rules had caused a "moratorium" on the construction of power plants and other large facilities, they often referenced the backlog of projects that needed to meet new requirements before they could get their construction permits.

The situation is like a "hamster wheel," said Steve Rowlan, director of environmental affairs at the Charlotte, N.C.-based steel company Nucor Corp. (Greenwire, Dec. 13, 2010).

"You get in there and you start running, but as long as they keep throwing new standards at you ... you're caught in the process," he told Greenwire last year.

The wording of McCarthy's declaration suggests that companies should only be subject to rules that were already in place when they first submitted an application. But EPA spokesman Brendan Gilfillan downplayed the impact of the filing, saying that the Avenal project had been in the pipeline before EPA even suggested the changes to the NO2 standard.

There are 10 or 20 projects that have been awaiting a permit decision since EPA issued the NO2 proposal in July 2009, he said.

When exposed to sunlight, the chemical combines with other types of air pollution to form ground-level ozone, which is the main ingredient in smog. It is released by coal-fired power plants and other industrial plants, as well as the tailpipes of motor vehicles.

When the agency issued a new limit on the average amount of NO2 in the air over an hour, it required the use of computer modeling along with monitors. Technical issues and data problems have made it more difficult for businesses and state agencies to demonstrate that a plant would not cause a violation of the new air quality standards.

EPA says these were unintended consequences. If businesses had not had so much trouble meeting these rules, they would never have been subjected to the new limits on greenhouse gases in the first place, an EPA air official told Greenwire this morning.

The new exemption is not the first time that EPA has created a grandfathering provision to avoid problems in the transition to a new air quality standard.

"It doesn't happen all the time, but it has happened in the past," the air official said.

Because this is a significant shift in EPA policy, the agency concluded that it will need to take public comment on the change. Though it addresses one of the biggest complaints from industry, it may get a cool reception from environmental and public health groups, which recently criticized the Obama administration for delaying some of its controversial air rules.

Three years of waiting

The developers of the Avenal project sued EPA last spring. They claimed that federal officials were required to make an up-or-down decision on the permit application within one year -- a deadline that passed in March 2008.

Represented by Jeff Holmstead, an attorney at Bracewell & Giuliani LLP who held McCarthy's job during the George W. Bush administration, the developers argued that there was no reason to block a power plant that would be one of the cleanest in the world.

In its initial briefs, EPA argued that no matter what the court decided, it would need to give the developers enough time to show that their project's air pollution would not cause the surrounding area to violate the overall limit on NO2 in the air.

Several more months passed, and EPA still hadn't acted on the permit. EPA noted that the developers hadn't shown that their project wouldn't lead to a violation of the new standards for sulfur dioxide either. And with climate rules about to take effect, new projects would soon need to meet another requirement, Holmstead said.

"If the Avenal permit is not issued by year's end," he wrote in a filing last month, "Avenal will be forced to go back through the permitting process to meet another new permitting requirement scheduled to take effect at the beginning of 2011 -- nearly three years after EPA determined Avenal's [permit] application was complete."

The declaration by McCarthy was filed with the court Monday, one day before a scheduled conference between attorneys for EPA, Avenal and U.S. District Court Judge Richard Leon. The court has yet to rule or issue an order.

Click here to read EPA's filing.

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