Does the Obama administration's surprising move on ozone standards signal a shift on environmental regulations? During today's OnPoint, Richard Alonso, a partner in Bracewell & Giuliani's Environmental Strategies Group, discusses the Obama administration's decision to back down on tougher ozone standards. He explains how this move could affect other regulatory measures and gives his take on the Obama EPA's overall strategy relating to the Clean Air Act.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Rich Alonso, a partner in Bracewell & Giuliani's Environmental Strategies Group. Rich, thanks for coming on the show.
Richard Alonso: Thank you, nice to be here.
Monica Trauzzi: Rich, let's start with last week's big news coming out of the Obama administration that they are backing down on their push for stricter ozone standards. Some see this as a political move, others say it falls in line with the administration's push for less regulation. How do you see things?
Richard Alonso: Well, I think that it's still kind of out there. Industry is kind of -- we don't really know what this means. First of all, it is a good thing. I think the Obama administration is realizing that there has to be some type of rollback at EPA, so I think it's clear evidence of that. But, you know, the fear is that, you know, we have these other rules out there which are part of what folks are calling the train wreck situation, particularly the Cross-State Air Pollution Rule, the utility MACT. So the judges, you know, it's still out there, the judgment is still out there to really what does this mean. Keep in mind the ozone standard was a political process. From the beginning, there was kind of an optional, totally discretionary to review the Bush administration ozone standard and, plus, it's going to be revisited in 2013 as well. So, while politically I think it shows that the administration is concerned about these overreaching EPA regulations, it's still kind of the jury is still out as to what does this actually mean --
Monica Trauzzi: But you think there was some --
Richard Alonso: On the floor.
Monica Trauzzi: Clear strategy as to why they chose the ozone standard, as opposed to some of the other standards that are highly contested?
Richard Alonso: Absolutely. The ozone standard applies economy wide and impacts states, local governments. It puts a lot of pressure on them to show that they can meet a new standard. There's a lot of negativity that goes along with being in non-attainment with those standards. So I think, yes, it was an easy one for them to roll back on. Again, the other ones that are still out there, the utility MACTs, the industrial boiler MACT, the Cross-State Air Pollution Rule have really the same effect on electric liability as far as electrical prices that can also impact adversely the economy. So the jury is still out as to exactly is this the beginning of something good or was this just a quid pro quo within the administration? We'll let go of the ozone standard, but what does that mean for the other regulations coming down the pike?
Monica Trauzzi: And what's your take on that? Has EPA or the administration given any signal that they may rollback on some of these other regulations or is the sign really that it's full steam ahead, especially on greenhouse gases?
Richard Alonso: Well, on greenhouse gases, I think, clearly it's full steam ahead. There's no -- we don't see any type of flexibilities coming down the pike as to permitting of greenhouse gases from stationary sources. There was the biomass issue, where EPA kind of let that be exempt from PSD permitting in the near term. But as to other stationary sources, greenhouse gases regulation is here. I don't see them backing away from developing NSPS standards for greenhouse gases as a -- you know, as per their agreement with environmental groups recently. So, on greenhouse gases, I don't see them really backing up. The question is going to be what's going to happen to the Cross-State Air Pollution Rule and the utility MACT? There, clearly those rules need to be rolled back some. It was a very, very aggressive approach that the agency took on finalizing the Cross-State Air Pollution, as well as the proposed utility MACT. And there's yet to -- that has yet to play out. And I think, I don't know if this is assigned to that, we hope it is, but, at the same time I think it's -- there's a lot of problems with those rules.
Monica Trauzzi: So, let's talk about PSD. Get us up to speed on what's happened since July 1.
Richard Alonso: Well, since July 1, basically if you trigger the threshold, regardless of whether your other traditional PSD pollutants are below the threshold or not, you need to get a PSD permit. What we're seeing though, however, is that because of the greenhouse gas threshold being exceeded, what's going on is that there's a lot of sources out there that would have traditionally required a minor source permit, that could've been basically permitted in three months. But for the CO2 threshold, they now have to go in and get major source permit for non-greenhouse gas pollutants, such as NOX and SO2, and those are really delaying a lot of projects. The business folks would, you know, be used to permitting these type of sources in three months and now the environmental folks are saying, guess what, you can't build your project for another 18 months. And that's usually the typical timeframe it takes to get a PSD permit. So, it's really affecting a lot of people trying to get those permits out.
Monica Trauzzi: So, from a business standpoint, how does this impact the economy? I mean we're talking about the economy here in Washington. When you look at a rule like this, what's the impact?
Richard Alonso: Well, it brings up a lot of uncertainty. How long is it going to take to get the permit out of the permitting authority? Major PSD permitting, everybody knows it's a very difficult process. It's at least -- the quickest is probably a year to get a permit and especially after court challenges and whatnot. Traditionally, I think even EPA has said in the past, on average it takes 18 months. And the impact to the economy is, is that you cannot start construction of the new project until after you get that permit. And that permit is final usually after a lot of litigation, not only technical development, but litigation and court proceedings. So it really, really delays a lot of projects.
Monica Trauzzi: You used to work at EPA in Clean Air Act Enforcement. Has the Obama administration taken liberties beyond those that you maybe would've felt comfortable or familiar with during your time at EPA when it comes to the Clean Air Act?
Richard Alonso: You know, it's funny, because under the Clean Air Act in the Bush administration it was the Enforcement office that was really driving controls. And a lot of the, you know, pollution controls to the new source review enforcement process, what's changed in this administration is that you have the rulemaking side of EPA, whether it's the ozone standard, the utility MACTs really being the drivers for pollution control to get those installations out there. You know, I think there's still a lot of EPA enforcement going on there, but really the driver to put on these controls is coming out of the Rule Making office as opposed to in the Bush administration it was out of the Enforcement office.
Monica Trauzzi: What are the key or some of the key regulatory items that you're really going to be looking for over the next couple of months coming out of EPA?
Richard Alonso: I think a lot is right now in the, you know, obviously the utility MACT. How does that get formalized? What do the NSPS proposals for greenhouse gases look like from EPA? And we should be expecting those sometime this fall. And, you know, and also kind of what goes on with the Cross-State Air Pollution Rule. Administratively, does EPA stay that rule pending, you know, some type of reconsideration process like it did with the boiler MACT? It will be really interesting to see if a court gives a stay of that rule. There's a lot of-the EPA really surprised the world on that final rule, making it a lot more stringent than what the proposal was. So it will be very interesting to see what they do in the next couple of months with the Cross-State Air Pollution Rule as well.
Monica Trauzzi: All right, Rich, thank you, thank you for coming on the show.
Richard Alonso: All right, thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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