EPA Acts on Greenhouse Gas Emissions After Senate Stalls on Cap and Trade

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The EPA acted because the Senate didn't.

Last week, the U.S. Environmental Protection Agency (EPA) issued a long-awaited draft rule on greenhouse gas emissions after the Obama administration decided that draft Senate energy legislation did not go far enough in trying to reduce heat-trapping greenhouse gas emissions.

Last Wednesday, EPA Administrator Lisa Jackson unveiled the agency's draft greenhouse gas emissions rule on the same day that Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) released their 821-page draft energy bill, named the "Clean Energy Jobs and American Power Act." The timing was not coincidental. Sources said that the Obama administration, frustrated that Boxer-Kerry lacked any specific mechanism to reduce greenhouse gas emissions, decided to move on its own. For more information on Boxer-Kerry, see October 2, 2009, article - Boxer-Kerry Draft Climate Bill Seeks Larger Emissions Reduction, is Silent on Cap & Trade.

The EPA draft rule would require large industrial facilities that emit at least 25,000 tons of greenhouse gas emissions per year to obtain construction and operating permits covering these emissions. These permits must demonstrate the use of best available control technologies and energy efficiency measures to minimize greenhouse gas emissions when facilities are constructed or significantly modified.

The draft rule covers these six greenhouse gases:

• Carbon Dioxide (CO2)
• Methane (CH4)
• Nitrous Oxide (N2O)
• Hydrofluorocarbons (HFCs)
• Perfluorochemicals (PFCs)
• Sulfur Hexafluoride (SF6)

EPA estimated that the rule would affect approximately 14,000 large stationary sources, including power plants, oil refineries, cement-production facilities, and other manufacturing concerns. Most of these sources already are subject to clean air permitting requirements because they emit other pollutants, the EPA said. The 14,000 includes about 400 new stationary sources, as well as sources that undergo modifications of some significance, the agency said in a news release.

These 14,000 stationary sources account for about 70% of U.S. greenhouse gas emissions annually, Jackson said. The agency exempted many small businesses, including farms, restaurants, and other small companies that emit less than 25,000 tons of greenhouse gases per year.

The EPA will accept public comments for 60 days after the draft rule is published in the Federal Register. The draft rule issued September 30 is more than 400 pages in length. The agency also made available a fact sheet covering major aspects of its draft rule.

An earlier draft of this rule alarmed industry and drew more than 16,000 comments. For more on the initial draft rule, see July 23, 2009, article, EPA Wades Through Comments on its Draft Greenhouse Gas Reporting Rule. Affected companies and industry groups used words like "tough," "controversial," and "far-reaching" to describe last week's draft rule, suggesting another round of extensive comments, as well as likely preparation of litigation.

The New York Times reported that the prospect of EPA regulation of greenhouse gases "has generated fear and deep divisions within American industry. Some major utilities, oil companies and other heavy emitters are working closely with Congress to ensure that a climate bill would circumvent EPA regulation by substituting a market-based cap-and-trade system." In recent weeks, the U.S. Chamber of Commerce lost several utility members, including Pacific Gas & Electric, a unit of PG&E Corp. (NYSE:PCG) (San Francisco, Calif.); Exelon (NYSE:EXC) (Chicago, Ill.); and PNM Resources (NYSE:PNM) (Albuquerque, N.M.) because of the organization's stance on climate change. Last year, Duke Energy (NYSE:DUK) (Charlotte, North Carolina) left the National Association of Manufacturers (NAM) because of that group's stance on climate change.

Prior to last week's EPA action, an industry source told Industrial Info: "The only thing worse than federal legislation on cap and trade would be leaving [carbon reduction] to the EPA. Its carbon dioxide 'endangerment' ruling was really scary. We may not get Congress to act this year, but maybe we can get it done next year."

That approach may not be dead yet: Although Boxer-Kerry lacked any provision for cap and trade, its sponsors said they will look to the Senate Finance Committee, chaired by Sen. Max Baucus (D-Mont.), to address mechanisms, such as cap and trade, by which greenhouse gases could be reduced over time. If senators are as alarmed as some members of industry about the prospect of EPA regulation of greenhouse gases, that could spur action on draft legislation that makes the agency's rulemaking unnecessary.

In announcing the draft rule, EPA Administrator Jackson told a governor's conference on climate change, "EPA is ready to work with Congress--and all of you--to bring a strong climate and energy bill to the American people. But we are not going to continue with business as usual while we wait for Congress to act. We have the tools and the technologies to move forward today, and we are using them."

Some trade groups, like the Chamber of Commerce and NAM, have threatened to file lawsuits against the EPA if it tries to regulate greenhouse gases. A week before the EPA's September 30 announcement, NAM called for the Senate to impose a one-year "time-out" on the agency's ability to regulate greenhouse gases.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.