by: Carlos J. Moreno

On May 3, 2011, the U.S. Environmental Protection Agency (EPA) promulgated a final rule partially disapproving the Texas State Implementation Plan (SIP) and issuing a Federal Implementation Plan (FIP) for Texas. The action prolongs EPA’s authority to issue Prevention of Significant Deterioration (PSD) permits for Greenhouse Gas Emissions (GHG) emissions in Texas. Under the Clean Air Act (CAA), states have authority to implement the federal National Ambient Air Quality Standards (NAAQS) if the state submits, and EPA approves, a State Implementation plan (SIP). The SIP must include implementation of preconstruction PSD permitting requirements for NAAQS pollutants and, according to EPA, non-NAAQS pollutants. The CAA authorizes EPA to call for revisions to a SIP ("SIP Call") if the agency later finds that a SIP is inadequate. Following a series of EPA regulatory actions, GHG emissions became subject to PSD requirements as a non-NAAQS pollutant beginning on January 2, 2011. Since then, the EPA Tailoring Rule has required sources that trigger PSD for pollutants other than GHGs to also permit GHG emissions if they are 75,000 tpy or more.

On December 1, 2010, EPA issued a SIP Call for 13 states, including Texas, whose SIPs needed revisions in order to regulate GHG emissions under their PSD permitting program. Contrary to the other states, Texas refused to set a timeline for a SIP revision, effectively telling EPA that it would not revise its SIP to cover GHG emissions. To ensure that sources could obtain GHG permits, EPA issued an interim final rule and a "mirror" rule proposal in December 2010 that partially disapproved the Texas SIP and promulgated a FIP authorizing EPA to issue GHG permits under PSD. EPA stated that it erred in approving the Texas SIP 18 years earlier because the SIP does not contain assurances of adequate legal authority for the application of PSD to newly regulated non-NAAQS pollutants. The interim final rule was set to expire on April 30, 2011. Texas has filed several judicial challenges to EPA’s GHG regulations in the DC Circuit, as well as a challenge in the 5th Circuit to EPA’s SIP Call finding the Texas SIP inadequate. After issuance of the final interim rule, Texas requested a stay of the rule in the DC Circuit. The DC circuit granted a 30-day stay that was subsequently lifted on January 12, 2011. Since then, EPA has effectively been the permitting authority for GHG emissions in Texas. On May 3, 2011, EPA finalized the December 2010 rule proposal partially disapproving the Texas State Implementation Plan (SIP) and issuing a Federal Implementation Plan (FIP) for Texas. The action was made effective on May 1st to ensure no gap in permitting coverage.

One of the arguments that Texas has pursued is that EPA issued the December 2010 error correction FIP without proper notice and comment. By essentially reissuing the FIP under this final rule after notice and comment, EPA has addressed this argument. Under the FIP, EPA continues to be the PSD permitting authority for GHG emissions in Texas, while Texas continues to be the permitting authority for non-GHG emissions. Therefore, a project that is currently subject to PSD may require two PSD permits: a Texas Commission on Environmental Quality (TCEQ) PSD permit for pollutants other than GHG, and a EPA PSD permit for GHG emissions if the project has 75,000 tpy or more of GHG emissions. Currently, GHG PSD permits are only required if New Source Review is triggered by a non-GHG pollutant. But, starting on July 1, 2011, EPA’s GHG Tailoring Rule will also require PSD permits for sources that trigger PSD solely because of their GHG emissions (100,000 tpy or more of GHG’s for new projects; 75,000 tpy or more of GHG’s for modifications). For these projects, EPA will be the PSD permitting authority for all pollutants. The final error correction FIP will remain in place until Texas submits, and EPA approves, a SIP revision including GHG permitting. Under EPA’s standing SIP Call, Texas still has until December 1, 2011 to submit a SIP revision that includes application of PSD program requirements to GHG emissions. EPA has already stated that if Texas does not submit a revision by this date, EPA is prepared to promulgate a new FIP associated with the SIP Call, which would replace the May 3rd FIP, but be "fully consistent" with it. In the meantime, litigation regarding EPA’s authority to regulate GHGs, error correction FIP for Texas, and the GHG SIP Call is continuing in the DC Circuit and 5th Circuit.