CLIMATE:

Small businesses see devil in details of EPA emissions rule

Advocates for small businesses are accusing U.S. EPA of failing to properly assess the effects that its proposed "tailoring" rule for greenhouse gases will have on smaller emission sources.

EPA is expected early this year to unveil the final tailoring rule, part of a broader suite of greenhouse gas regulations. The tailoring rule is aimed at shielding smaller sources from permitting requirements that could be triggered when EPA finalizes pending greenhouse gas limits for automobiles and the emissions become "subject to regulation" under the Clean Air Act.

EPA's proposal would raise emission thresholds for facilities that need permits from 100 or 250 tons of pollution per year to 25,000 tons of carbon dioxide equivalent per year (E&ENews PM, Sept. 30, 2009). EPA says that the proposal will allow the agency to zero in on the biggest polluters.

But small-business advocates are blasting the agency for failing to adequately evaluate the economic effects that the tailoring rule and other pending greenhouse gas rules will have on small businesses.

"Whether viewed separately or together, it is clear that EPA's Clean Air Act greenhouse gas rules will significantly affect a large number of small entities," according to comments filed by an independent advocacy office within the Small Business Administration.

SBA's Office of Advocacy's mission is to reduce the burdens of federal policies on small companies. The comments do not necessarily reflect the position of the Obama administration or the SBA, the office said.

Under the Regulatory Flexibility Act, the advocacy office said, EPA must convene a panel to assess the potential impact of the rule on small businesses. "By failing to do so," the office said, "EPA lost its best opportunity to learn how its new greenhouse gas rules would actually affect small businesses, small communities, and small non-profit associations."

According to EPA's proposal, the tailoring rule provides regulatory relief rather than regulatory requirements for smaller sources of greenhouse gases for a period of six years because it lifts the burden of obtaining New Source Review (NSR) and operating permits. In the six years after the rule is finalized, EPA estimates it will exempt more than 6 million sources from permitting requirements.

But the advocacy office warned that at least 1,200 small entities would be required to obtain Clean Air Act operating permits for the first time, including brick manufacturers, pulp and paper mills, small coal mines and other sources. The anticipated greenhouse gas emissions from those sources will exceed the 25,000-ton threshold proposed by EPA, the office said.

The National Mining Association also weighed in on the issue, accusing EPA of playing "a game of Three-Card-Monte with its (lack of) analysis of the impact of these actions on small entities."

NMA said small municipal electric utilities, small rural electric cooperative generators, automobile service centers and other operations are small entities whose emissions put them over the 25,000-ton threshold. And because the thresholds will be triggered by potential emissions instead of actual emissions, it said, "there will be many small sources triggering these requirements."

Because EPA had no basis to avoid conducting a panel to assess the impacts on small businesses, SBA's advocacy office is urging the agency to reconsider or delay its "endangerment" finding that greenhouse gases threaten public health and welfare, which sets the stage for formal regulations. The office also called on EPA to conduct a panel review of the entire greenhouse gas regulatory program.

EPA spokeswoman Cathy Milbourn said the agency is still reviewing comments on the rule.

State regulators request more time

State and local air regulators are asking EPA to delay permitting requirements for stationary sources to ensure that conflicts between the tailoring rule and state programs do not overwhelm permitting authorities.

While EPA's tailoring rule seeks to raise the permitting thresholds across the country, state regulators and some industry groups are warning the agency that states will need additional time to change lower thresholds that they have on the books.

Nearly 40 states operate under EPA-approved "State Implementation Plans" (SIPs) that establish a 100- or 250-ton threshold for the permitting requirements, according to an association of state and local air regulators. Those state limits would remain in place until state laws and regulations are modified, the group said. The National Association of Clean Air Agencies (NACAA) laid out its concerns in comments submitted last month to EPA.

"The issue isn't whether EPA can proceed with its regulation," NACAA executive director Bill Becker said. "The issue is the extent to which going forward with the regulation is going to be done in a smooth transition or will wreak some havoc amongst the states."

Under EPA's proposal and based on EPA estimates, tens of thousands of NSR and operating permit applications will need to be submitted by June 2011 to allow business to function normally, the group said.

EPA said in its proposed rule that the agency could partially limit its approval of the state plans, raising the permitting threshold to 25,000 tons without requiring states to revise their SIPs. EPA's Milbourn declined to comment on the matter, saying that the agency is still reviewing comments.

"I think EPA underestimated the actions that states would be required to take to begin implementing this program," Becker said, adding that the agency is working to come up with a solution. "Now they understand it's not that simple," he said.

Some industry groups are also concerned about the possibility of conflicting federal and state requirements.

Lou Hayden, a policy analyst with the American Petroleum Institute, called the tailoring rule a "hollow protection," in part because the rule does not instantaneously change all the state thresholds.

In its comments to EPA, the industry group said, "EPA's proposed method of amending State Implementation Plans ('SIPs') to accommodate the tailoring rule is unlawful," adding that the agency must allow enough time for EPA to propose and finalize its approval of states' SIP revisions.

To stave off administrative burdens, state regulators are asking EPA to give permitting authorities between one and two additional years to increase the thresholds. They can do that, NACAA said, by interpreting that pollutants are "subject to regulation" under the Clean Air Act at the same time that mobile source regulations take effect, rather than when they are promulgated.

Under that interpretation, EPA could choose from several dates in 2011 or January 2012 to determine when greenhouse gases are "subject to regulation," NACAA said, rather than triggering the permitting requirements when the vehicle rule is promulgated later this year.

"The solution to that is simple, and that is to transition the phase-in for a limited period of time that will provide states with the opportunity to change their laws and regulations," Becker said. "And that solution will not in any way delay the startup of the motor vehicle program that's expected to be promulgated in March."

Roger Martella, former EPA general counsel under the George W. Bush administration, said state and industry groups agreed that the agency has viable options to postpone triggering the permitting requirements once it finalizes the car rule.

"Where the states articulated sound policy reasons for deferring [permitting] requirements, the industry comments provided a legal blueprint to EPA for how to implement such a stay," Martella said.

But David Bookbinder, the Sierra Club's chief climate counsel, said that path could be difficult.

"I doubt that EPA can give them more time," Bookbinder said. No matter how sympathetic EPA is to the states' plight, he said, "I do not see them getting anything more than the 60 days after the auto rule gets to the Federal Register."

Enviro group urges regulatory expansion

Meanwhile, the Center for Biological Diversity is urging EPA to expand its stationary source regulations beyond those proposed in the tailoring rule.

In comments filed last month, the nonprofit applauded EPA's decision to reduce greenhouse gases using EPA's NSR and operating permit programs, but said that the agency substantially overstated the resources needed to implement permitting for smaller sources and failed to establish why it would require six years to develop guidelines for sources below the 25,000-ton threshold.

"While we endorse EPA's stated intent to ensure that new source review for GHGs is implemented immediately for the largest polluters to maximize GHG reductions, EPA has not demonstrated that it would be impossible or absurd to implement new source review for pollution sources less than 25,000 [tons per year] in less than the six years proposed by the agency," the group said.

The group urged EPA to revise the tailoring rule appropriately "to ensure that the agency fully complies with the Clean Air Act and that the public receives the full benefit and protection of this flagship law which has so successfully protected the air we breathe for over four decades."

EPA proposed to complete a study within five years evaluating the administrative burden resulting from the final threshold and to revise the threshold -- if necessary -- one year from completion of the study. EPA said the five-year period is needed to evaluate the first phase of the tailoring rule and to give permitting authorities enough time to implement the thresholds and to compile a sufficient implementation record.

Other environmental groups applauded EPA's approach.

"A phased approach allows the agency to begin regulating the largest sources of GHG emissions as soon as possible while collecting more information about emissions from various categories of smaller sized stationary sources," according to comments filed by the Sierra Club, Environmental Defense Fund, Natural Resources Defense Council and other groups.

The Sierra Club's Bookbinder downplayed CBD's concerns.

"If what they're saying is EPA is taking too much time to find a way to deal with the smaller sources, that's a very small quibble, and our view of things is long before those six years are up there will be climate legislation that resolves this," Bookbinder said.

CBD has repeatedly called on EPA to utilize all the tools available under the Clean Air Act to slash greenhouse gas emissions, an approach that has drawn criticism from industry as well as other environmental groups.

Last month, CBD filed a petition asking EPA to establish allowable nationwide concentrations for carbon dioxide and other heat-trapping gases. EPA Administrator Lisa Jackson and several prominent environmental groups oppose such an approach (Greenwire, Dec. 8, 2009).

Click here to read EPA's proposed rule.

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