The Environmental Protection Agency’s Environmental Appeals Board (EAB) heard oral arguments this morning in a precedent-setting case that will determine whether EPA is required to consider emissions limitations on CO2 as part of the permitting process for coal-fired power plants and other emitters of greenhouse gases. The case of In re Deseret Power Electric Cooperative, which challenges EPA’s refusal to use its permitting authority under the Clean Air Act (CAA) to impose on controls on CO2 emissions from a proposed Utah waste-coal fired power plant, will impact dozens of challenges to coal-fired power plant permits pending in state agencies and appeals boards throughout the country.

The CAA’s Prevention of Significant Deterioration (PSD) provisions require EPA to impose emissions limits in the form of Best Available Control Technology (BACT) for “each pollutant subject to regulation” under the Act. If a pollutant is “subject to regulation” for purposes of PSD permitting, the agency must make case-by-case determinations of what constitutes appropriate emissions limitations and control technology for a specific facility. CO2 is currently subject to monitoring and reporting requirements, but EPA will not promulgate required emissions reductions until the agency makes an endangerment finding, which EPA is now considering as part of an Advanced Notice of Proposed Rulemaking.

Today’s arguments - and the judges’ questioning - focused on two narrow issues of statutory construction: (1) whether the term “subject to regulation” requires that a pollutant be subject to emissions controls under the CAA, or merely monitoring and reporting requirements; and (2) whether the monitoring and reporting requirements are an enforceable part of the CAA such that they could be used as a hook for subjecting a pollutant to BACT.

The Sierra Club, as Petitioner, and New York State, representing an amici group of Northeast states and California, argued that the EPA’s refusal to include CO2 as a pollutant “subject to regulation” under the PSD provisions of the CAA is contrary to statutory language, legislative history and the Supreme Court’s decision in Massachusetts v. EPA. Sierra Club argued that unlike the requirement that EPA make an endangerment finding before establishing National Ambient Air Quality Standards (NAAQS) and motor vehicle emissions standards, the PSD provisions contemplate application of BACT to pollutants that are not subject to an endangerment finding.

The EPA, the permittee Deseret Power, and the Utility Air Regulatory Group argued that in order to be “subject to regulation,” CO2 would have to be subject to an emissions limitation, such as the NAAQS. The inclusion of CO2 in the monitoring and reporting requirements under the 1990 Clean Air Act amendments does not, according to EPA, translate into emissions limits that would subject a pollutant to BACT. Furthermore, these groups contend that the monitoring and reporting provisions of the 1990 amendments are not a part of the CAA such that CO2 would be considered a pollutant subject to regulation under the Act. This complicated statutory argument, which Sierra Club argued was not grounded in the legislative history of the 1990 amendments or the EPA’s long-held interpretation of the Act, was received with some skepticism by the panel.

This case is being closely watched by both sides of the debate because of its precedential effect. Although subject to a likely appeal, the EAB’s pronouncement will constitute the final word of the EPA on this matter and will send ripples through state agencies considering permit applications for coal-fired power plants and other large emitters.

For further information about this topic, please contact Akin Gump.