EnviroNotes

october 2009

U.S. EPA Announces Greenhouse Gas Permitting Thresholds
U.S. EPA Changes the Game on PM2.5 NSR Implementation
IDEM Prepares Overhaul to Air Permitting Rules
Proposed Excess Liability Trust Fund Rule Amendments Significantly Impact Eligibility
U.S. EPA Finalizes Greenhouse Gas Reporting Rule

U.S. EPA Announces Greenhouse Gas Permitting Thresholds
By Andy Bowman, Chair, Environmental Law Department, Bingham McHale LLP

On September 30, 2009, U.S. EPA announced a proposed rule which requires large sources emitting over 25,000 tons of greenhouse gases (GHG) per year to obtain permits. According to U.S. EPA, approximately 14,000 facilities will be required to have operating permits for GHG emissions. The proposed rule is in anticipation of rules regulating GHG to go into effect by March 2010. Key provisions of the proposed rule include:

• Existing industrial sources will be considered a major source subject to Title V operating permit requirements if GHG emissions are greater than 25,000 tons per year
• New facilities and modifications to existing sources with GHG emissions greater than 25,000 tons per year would trigger PSD permitting requirements
• Existing major sources making modifications that result in an increase of GHG emissions between a significance level yet to be selected in the range of 10,000 to 25,000 tons per year would be required to obtain a PSD permit.
• New or modified facilities with GHG emissions that trigger PSD requirements would need to seek permit revisions requiring BACT and energy efficiency measures to minimize GHG emissions.
  Existing facilities with GHG emissions greater than 25,000 tons per year that already have a Title V operating permit would not need to revise their permits until renewal.
• Carbon dioxide equivalent (CO2e) will be used to determine GHG emission rates for the six GHGs (carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride).
• U.S. EPA will review the applicability thresholds after five years to determine whether the thresholds should be lowered to include additional facilities.

U.S. EPA will take comments on the proposed rule for 60 days from the publication of the proposal. Comments may be submitted at www.regulations.gov under Docket ID No. EPA-HQ-OAR-2009-0517. The proposed rule and additional information can be found at www.epa.gov/nsr.

U.S. EPA Changes the Game on PM2.5 NSR Implementation
By Larry Kane, Partner, and Matt Gernand, Attorney, Environmental Law Department, Bingham McHale LLP

Direct implementation of EPA’s National Ambient Air Quality Standards for PM2.5 (particulate matter less than 2.5 in microns in diameter) in the new source review (NSR) program has been deferred since their adoption in 1997 while EPA develops rules to provide needed technical specifications. Until those implementation rules are in place, EPA guidance since 1997 has provided that PM10 may be used as a surrogate for PM2.5 for purposes of the NSR program. However, in a recent order by the EPA Administrator, EPA granted petitions filed by the Sierra Club and other parties for objections to a Title V permit for a new supercritical pulverized coal-fired electric generating facility (which was combined with a PSD permit) originally issued to the Louisville Gas and Electric Company (“LG&E”) in January 2006 and a revised Title V permit issued in February 2008 (the “LG&E Decision”). In part, the Administrator objected to the Title V permits for failure to satisfy PSD requirements for PM2.5, based on the state agency’s use of PM10 as a surrogate for PM2.5. In making this decision, the Administrator stated that the use of PM10 as a surrogate for PM2.5 is not always appropriate and that the EPA’s guidance for use of PM10 as a surrogate "has limits." The decision is implicitly predicated, in part, on EPA’s then temporary administrative stay of part of its 2008 rule (described below) that continued to recognize EPA guidance allowing use of PM10 as a surrogate for PM2.5 in the NSR program.

The EPA promulgated the PM2.5 NAAQS in 1997. Shortly thereafter, the EPA issued a guidance document entitled “Interim Implementation for the New Source Review Requirements for PM2.5.” (John S. Seitz, U.S. EPA, October 23, 1997) (“Seitz Memo”). The Seitz Memo recognized that there were “significant technical difficulties” that exist with respect to PM2.5 implementation and that due to these difficulties “EPA believes that PM10 may properly be used as a surrogate for PM2.5 in meeting NSR requirements until these difficulties are resolved.” The memorandum goes on to state that “when the technical difficulties are resolved, EPA will amend the [applicable PSD regulations] to establish a PM2.5 significant emissions rate and EPA will also promulgate other appropriate regulatory measures pertinent to PM2.5 and its precursors.” A second memorandum issued on April 5, 2005, among other things, affirmed the use of PM10 as a surrogate for PM2.5. Implementation of New Source Review Requirements in PM2.5 Nonattainment Areas.

The EPA has promulgated its PM2.5 implementation rules in a piecemeal fashion. The first PM2.5 implementation rule, promulgated on April 25, 2007, contained the requirements for attainment dates, SIP submittals, and reasonable further progress, but did not include any NSR implementation provisions. Then, on May 16, 2008, the EPA issued its rule entitled “Implementation of the New Source Review (NSR) Program for Particulate Matter Less Than 2.5 Micrometers (PM2.5)”, which finalized some of the elements needed for implementation of the NSR program for PM2.5, such as the major source threshold, significant emissions rate and offset ratios. This rule did not, however, include some of the elements needed to fully implement the NSR program such as PSD increments, significant impact levels (“SILs”) and significant monitoring concentrations. These omitted elements were set out in a proposed rule on September 21, 2007, but have not yet been finalized. The preamble to the May 16, 2008 rule provides that PM10 may be used as a surrogate until the U.S. EPA has finalized all elements of the implementation rule. Further, the 2008 rulemaking contained two provisions relating to the transition to the use of PM2.5. First, it contained a “grandfathering provision” under the Federal PSD program which allowed PM10 to be used as a surrogate for PM2.5 for permit applications submitted before the July 15, 2008 effective date of the rule. Second it contained a provision allowing states three years from the date of publication of the rule to submit revised state implementation plans (“SIPs”) for regulating PM2.5 and, during the transition period, allowed states to continue to use EPA’s 1997 guidance by which a PSD analysis based on PM10 can be used as a surrogate for analysis based on PM2.5. On June 1, 2009 the U.S. EPA published a notice that it was reconsidering the “grandfathering provision” of the 2008 rule and that the provision would be administratively stayed for three months. Recently, on September 22, 2009, the U.S. EPA published a notice that it was extending the stay of that provision for an additional nine months until June 22, 2010. The provision allowing states three years to submit revised SIPs and the continued use of the PM10 surrogacy policy in the interim has not been stayed.

The EPA’s LG&E Decision recognizes that the 2008 rule allowed SIP-approved states to use PM10 as a surrogate for PM2.5 pursuant to the policy laid out in the Seitz Memo, but states that the Seitz Memo "has limits", based upon certain court decisions discussing the use of surrogates for PM. A 1999 case held that PM10 was an arbitrary surrogate for PM, but a 2009 case found that the facts and circumstances in that instance provided "a reasonable rationale" for using PM10 as a surrogate for PM2.5.

With those decisions as a foundation, and noting that the Seitz Memo was prefaced on technical difficulties present in the implementation of the rule which EPA now says have "largely been resolved,” the EPA Administrator concluded that the LG & E permit did not provide an adequate rationale to support the use of PM10 as a surrogate. Rather, "permit applicants and permitting authorities need to determine whether PM10 is a reasonable surrogate for PM2.5 under the facts and circumstances of the specific permit at issue and not proceed on a general presumption that PM10 is always a reasonable surrogate for PM2.5” (emphasis added).

The decision then offers a "possible approach for making that demonstration." First, EPA states that a strong statistical relationship must be established between PM10 and PM2.5. Second, the source or permitting authority must show that the control technology selected as BACT for PM10 will be at least as effective as the technology that would have been selected for control of PM2.5. Enigmatically troubling, however, is the EPA’s admonition that the suggested approach may not be "necessary or sufficient."

Further, in the September 22, 2009 notice regarding the extension of the stay of the “grandfathering” provision, the U.S. EPA stated that in the near future it would publish a notice in the Federal Register soliciting comment on “ending the PM10 Surrogate Policy in States with EPA-approved PSD programs in their SIP,” signaling that even the limited use of the surrogacy policy as described in the LG&E Decision may not be around for long.

Though the LG&E Decision arises from the context of the current enviro-jihad against the fossil fuel-fired power industry, the decision has far broader ramifications, given that its principles will be equally applicable to any NSR project for which PM2.5 will be emitted in amounts triggering NSR requirements.

IDEM Prepares Overhaul to Air Permitting Rules
By Jennifer K. Thompson, Partner, Environmental Law Department, Bingham McHale LLP

On July 27, 2009 the Indiana Department of Environmental Management (“IDEM”) published the long-awaited first notices of rulemakings to overhaul Indiana’s air permitting rules found in 326 Indiana Administrative Code 2 (“Article 2”). IDEM plans to address changes to Article 2 in two separate rulemakings: the Long-Term Article 2 Rulemaking (LSA #09-492); and the Near-Term Article 2 Rulemaking (LSA #09-493). In addition to these new rulemaking actions, IDEM second noticed its Article 2 Fix-Up Rule (LSA #07-372) on September 3, 2009 to make changes and corrections to address the United States Environmental Protection Agency’s (“U.S. EPA”) identified deficiencies and comments regarding the federal approveability of certain permitting rules as well as address other consistency issues.

Long-Term Article 2 Rulemaking (LSA #09-492)
The IDEM's Long-Term Article 2 Rulemaking will include amendments IDEM has categorized as requiring more extensive deliberation and consultation than the Near-Term Article 2 Rulemaking. The types of changes that might be included in this rulemaking, include but are not limited to:

1. Combining or streamlining, or both, overlapping permit programs;
2. Adding permit revision applicability to clearly define what would trigger a higher permit level. For example, revisions to 326 IAC 2-9 could allow a federally enforceable state operating permit source to lower its limits without being considered a significant modification; and
3. Removing unnecessary steps in the permit process. For example, deleting administrative requirements that are not required by federal rule or state statute and that do not provide value to the public or the applicant.

Near-Term Article 2 Rulemaking (LSA #09-493)
The Near-Term Article 2 Rulemaking will include amendments that IDEM believes can be adopted in an expeditious manner. The types of changes that might be included in this rulemaking, include but are not limited to:

1. Consolidating or revising definitions of the same term or similar terms to ensure consistency among rules;
2. Adding definitions for terms used in 326 IAC 2 that currently are not defined. For example, Article 2 has different requirements for environmentally significant changes to monitoring but does not define the term "environmentally significant"; and
3. Revising applicability language to allow for a notice-only change, an administrative amendment, a minor revision, or minor modification for a change that is clearly not significant. This would include changes to clarify when the addition of a new or revised federal requirement to permits can be accomplished through an administrative amendment, a minor revision, or a minor modification.

Article 2 Initiative Workgroup
IDEM has established an Article 2 Initiative Workgroup to address the Near and Long-Term Rulemakings. In addition to providing comments on recommended changes to the permitting rules, the Workgroup will assist IDEM in determining which issues should be addressed in each rulemaking. The Workgroup held its first meeting on September 16, 2009 and plans to meet approximately every six (6) weeks.

During the first Workgroup meeting IDEM announced that the following criteria will be applied to each recommended rule change to determine if the change will be addressed under the Near-Term or Long-Term rulemakings:

1. EPA approvability;
2. Accommodation of the rulemaking timeline;
3. Ease of implementation; and
4. Level of controversy.

Persons wishing to participate in the Workgroup have been asked to submit their recommended changes to Article 2 via email to Amy Smith at asmith@idem.in.gov by October 7, 2009 so that the Workgroup members can consider same before and during the next Workgroup meeting on October 29, 2009. For more information regarding the Article 2 Initiative Workgroup and for instructions on the required format for the submission of comments, visit IDEM’s Article 2 Initiative Website at http://www.in.gov/idem/6436.htm.

Proposed Excess Liability Trust Fund Rule Amendments Significantly Impact Eligibility
By E. Ryan Murray, Attorney, Environmental Law Department, Bingham McHale LLP

On July 29, 2009, the Indiana Department of Environmental Management (“IDEM”) published a Second Notice of Comment Period, LSA #08-684, entitled “Development of Amendments to Rules Concerning the Underground Storage Tank Excess Liability Trust Fund” (“ELTF”). The July 29, 2009 Second Notice is available here. The July 29, 2009 Second Notice provides proposed amendments to the ELTF rules set forth under 328 IAC 1. The proposed ELTF rule amendments include several significant revisions, including:

• Addition, amendment, and/or modification of definitions set forth under 328 IAC 1-1 including the terms: “closure,” “fund qualifying occurrence,” “repeated release,” “system,” “deductible amount,” and “substantial compliance;”
• Amendment of ELTF access requirements set forth under 328 IAC 1-3-1 including the addition of specific actions and activities that are not reimbursable by the ELTF;
• Addition of 328 IAC 1-3-1.2 regarding the electronic submission of information to the ELTF;
  Amendment of ELTF eligibility requirements set forth under 328 IAC 1-3-3(a)(1) including the addition of a requirement that an initial site characterization be completed and submitted to the IDEM within 60 days of release reporting and the addition of a schedule of five percent ELTF eligibility deductions for failure to satisfy this requirement;
• Amendment of ELTF eligibility requirements set forth under 328 IAC 1-3-3(a)(2) including: (1) a revision providing that substantial compliance with the Indiana spill rule must be accomplished at the time a release is “suspected” instead of “discovered” as currently provided in the ELTF rules; (2) the addition of a requirement that an owner and operator is not in substantial compliance with the Indiana spill rule if the owner and operator does not request in a certified letter within 45 days of granting access to a third party, the results of a third party environmental investigation that identifies a potential release; and (3) the addition of a schedule of five percent ELTF eligibility deductions for failure to satisfy the 45-day written request requirement;
• Amendment of ELTF reimbursable costs set forth under 328 IAC 1-3-5 including substantial revision of the schedule of reimbursable cost ranges and maximum amounts set forth under 328 IAC 1-3-5(e); and
• Amendment of the reimbursement application requirements set forth under 328 IAC 1-5-1 including the addition of a provision limiting the number of times a claim may be re-submitted.

According to the July 29, 2009 Second Notice of Comment Period, comments were due to the IDEM by August 28, 2009. Although the comment period has closed, opportunities remain open to be involved in the ELTF rule amendment process. First, IDEM has assembled an external workgroup of interested stakeholders to assist in the ELTF rule revision process. In order to submit comments to the workgroup, attend workgroup meetings, provide suggestions related to the workgroup process, or for other information regarding the proposed ELTF rule amendments, Ms. Lynn West, IDEM, Office of Legal Counsel (“OLC”) may be contacted at (317) 232-3593 or (800) 451-6027. Second, comments may be submitted during public hearings related to the Indiana Underground Storage Tank Financial Assurance Board’s (“FAB”) consideration of the proposed rule amendments. A public hearing before the FAB regarding the proposed ELTF rule amendments was scheduled for October 21, 2009. However, according to IDEM, OLC staff, the October 21, 2009 public hearing has been cancelled and will likely be rescheduled for January or February 2010.

U.S. EPA Finalizes Greenhouse Gas Reporting Rule
By Matt Gernand, Attorney, Environmental Law Department, Bingham McHale LLP

On September 22, 2009, the U.S. EPA issued its final greenhouse gas reporting rule. The rule, originally proposed on April 10, 2009, requires certain facilities to begin monitoring their greenhouse gas (“GHG”) emissions on January 1, 2010 and report those emissions on March 31, 2011 and annually thereafter. The U.S. EPA will use the data collected to formulate future policy decisions regarding GHGs. Affected facilities must monitor and report their annual emissions of carbon dioxide (“CO2”), methane (“CH4”), nitrous oxide (“N2O”), sulfur hexafluoride (“SF6”), hydrofluorocarbons (“HFCs”), perfluorocarbons (“PFCs”), and other fluorinated gases (e.g., nitrogen trifluoride (“NF3”) and hydrofluorinated ethers (“HFEs”)).

The following sources are required to report their GHG emissions:

Any facility, regardless of the amount of emissions, in the following source categories:

• Electricity generating facilities that are subject to the Acid Rain Program or otherwise report CO2 mass emissions year-round through 40 C.F.R. Part 75;
• Adipic acid production;
• Aluminum production;
• Ammonia manufacturing;
• Cement production;
• HCFC-22 production;
• HFC-23 destruction processes that are not co-located with a HCFC-22 production facility and that destroy more than 2.14 metric tons of HFC-23 per year;
• Lime manufacturing;
• Nitric acid production;
• Petrochemical production;
• Petroleum refineries;
• Phosphoric acid production;
• Silicon carbide production;
• Soda ash production;
• Titanium dioxide production;
• Municipal solid waste landfills that generate CH4 in amounts equivalent to 25,000 metric tons CO2e (1) or more per year, as determined according to 40 C.F.R. Part 98, Subpart HH;
• Manure management systems that emit CH4 and N20 (combined) in amounts equivalent to 25,000 metric tons CO2e or more per year, as determined according to 40 C.F.R. Part 98, Subpart JJ.

Any facility in the following categories that emits more than 25,000 metric tons of CO2e per year:

• Ferroalloy Production;
• Glass production;
• Hydrogen production;
• Iron and steel production;
• Lead production;
• Pulp and paper manufacturing; and
• Zinc production.

Any facility with stationary fuel combustion units with an aggregate maximum rated heat input capacity of 30 mmBtu/hr or greater and that emits 25,000 metric tons of CO2e or more per year.
Any suppliers of coal-based liquid fuels, petroleum products and natural gas and natural gas liquids.
Producers of CO2 and industrial GHGs and importers and exporters of CO2 and industrial GHGs with annual bulk imports or exports of N2O, fluorinated GHGs, and CO2 that in combination are equivalent to 25,000 metric tons of CO2e or more per year.
Manufacturers of engines used in mobile sources outside of the light-duty sector must monitor and report GHG emissions for all engines beginning with model year 2011.

Several changes were made from the rule as it was proposed. First, the U.S. EPA decided to defer reporting for the following source categories:

• Electronics manufacturing;
• Ethanol production’
• Fluorinated GHG production;
• Food processing;
• Magnesium production
• Oil and natural gas systems;
• SF6 from electrical equipment
• Underground coal mines;
• Industrial landfills;
• Wastewater treatment; and
• Suppliers of coal.

Additionally, the final rule has backed away from the “once-in-always-in” policy that was included in the proposed rule. Under the final rule, a source may cease reporting if it can demonstrate that its emissions have been less than 25,000 metric tons of CO2e for five consecutive years, or less than 15,000 metric tons of CO2e for three consecutive years, or operations have caused.

Again, the rule requires monitoring to begin by January 1, 2010, but contains a grace period for installing monitoring equipment. The rule states that if it is not “reasonably feasible” to acquire, install, and operate a required piece of monitoring equipment by January 1, 2010, sources may use “best available” monitoring methods until April 1, 2010. Sources may seek an extension of the April 1, 2010 deadline, but EPA will not grant extensions past December 31, 2010.

The U.S. EPA has created an Applicability Tool which allows sources to enter information about their combustion sources and fuel types to determine whether the rule will apply to their facility. The Applicability Tool and copy of the rule can be found at here.

(1) “CO2e” or “CO2 equivalent” is defined as “the number of metric tons of CO2 emissions with the same global warming potential as one metric ton of another greenhouse gas” and is calculated using a formula provided in the rule.

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