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Monday, March 15, 2010

US EPA Announces New National Threshholds for CO2 Emissions

The United States Environmental Protection Agency has recently announced its future plans to require new carbon emissions permits for pollution point sources (such as electric utilities) emitting over 75,000 tons of carbon annually.  This is a major development that should impact many companies and businesses in America.  The EPA seems to be acting in a manner intended to push the Senate and House to pass a federal climate change control regime (such as cap-and-trade).  These EPA measures are intended to be a baseline or fall-back regulatory position in lieu of similar or stricter Congressional legislation.

I believe that if the EPA continues to advance the ball on carbon emissions regulation, it will only be a matter of 12 months or so before the Congress responds with a more robust and business friendly version.  It is expected that the Congressional version will include some version of carbon trading in order to mitigate the costs of regulation and pump new money into the economy. 

In the meantime, it is exciting that the EPA is taking the steps that it is currently taking -- please see the short newsflash below from Dow Jones.  I will stay on top of all related developments as they occur.  Cheers.

EPA: CO2 Threshold At Least 75,000 Tons/Year Until 2013


WASHINGTON -(Dow Jones)- The U.S. Environmental Protection Agency will set an emissions threshold of at least more than 75,000 tons a year--and possibly more than 100,000 tons a year--for power plants and other industrial projects for the initial stage of stationary-source greenhouse-gas regulations between 2011 to 2012, the head of the agency said Wednesday.

Importantly, EPA Administrator Lisa Jackson indicated the agency may still require projects such as power plants and refineries that applied in prior years--say in 2009 or 2010--to apply for new greenhouse-gas permits. Industry may view her comments as imposing de facto greenhouse-gas regulations on projects now under development, potentially stunting growth.

The new figure--multiples of what the agency proposed late last year-- gives the first indication of the new standards the EPA is planning to set under new regulations due out as soon as late this month.

The threshold level and time line is critical to thousands--if not tens of thousands--of businesses such as power plants, refineries, cement kilns, steel mills and chemical plants. The higher the level in the initial stages, the fewer facilities will be required to comply.

The EPA said it would raise the threshold after state regulators warned that the agency's proposed rules would cover substantially more facilities than it realized, potentially compromising not only businesses but also economic growth.

Asked by Senator Dianne Feinstein (D., Calif.) in an appropriations hearing if the first phase of the greenhouse-gas regulations would be more than 75,000 to 100,000 tons a year, EPA Administrator Lisa Jackson said, "That's absolutely true."

"It will probably be at least two years before we would look at something like, say, a 50,000 threshold," Jackson told a Senate appropriations subcommittee reviewing the agency's budget.

Later asked by reporters to clarify, Jackson said, "If you're smaller than 75, 000 tons for the next two years, you would not need a permit," and said her comments applied to the years 2011-2012.

Fully two thirds of the stationary-source emissions are from sources emitting more than 100,000 tons per year, she said.

But some industry experts warn the new thresholds and delayed start date may prove futile if the EPA requires facilities already in the permit process now to apply for new greenhouse-gas permits later.

Asked if the EPA would pursue such requirements, Jackson said "the permit requirements apply at the time that the permit is issued."

While Jackson said the EPA wouldn't intentionally hold up permits, she said, " the permitting process for major stationary sources ... can take years, so it isn't fair to say that at some point in there, there may not be changes in the regulatory environment."

Bill Wehrum, a former head of the EPA's air programs and now a partner at Hunton & Williams, said that EPA was urged in public comments against requiring companies already in the permit process to reapply. He said industry may view Jackson's comments as imposing de facto greenhouse-gas regulations on projects now under development and that if the EPA pursues that policy, it could stunt business growth.

"It doesn't make any sense," he said. "If EPA requires anybody who's applied for a permit but not obtained final approval to go back and get new greenhouse- gas permits, it will significantly delay any number of important projects already in the pipeline."

For example, a senior BP Plc (BP) official said last week that refinery modifications required to meet new fuel specifications could be put on hold or delayed in such a situation.

After a wave of state regulators warned the EPA that its initial threshold of 25,000 tons a year was too low and would cover far more facilities than the agency realized or regulators are able to process, the EPA said last week it would raise the threshold "substantially."

Jackson said she was making the decision to avoid absurd results and to aid the administrative process. State regulators say they lack the resources-- both money and staff--to handle the expected influx of new permit applications.

Industry groups, such as the U.S. Chamber of Commerce and the National Association of Manufacturers, warn that the regulations will lead to a cascade of lawsuits and damage the economy. The EPA said it will regulate with a sensitivity to the economy.

The EPA said it intends to pursue regulation of smaller sources after 2016. Some state regulators say that would cover up to six million facilities, including large bakeries, churches, hospitals and small mom-and-pop businesses.

Some legislators say that even with the higher thresholds and expected delay of implementation EPA announced, they're worried the agency's actions won't prevent damage to industry.

"I am quite concerned that EPA's action in this area will harm our economy at a time that we can least afford it," said Sen. Lisa Murkowski (D., Alaska). The Senator is leading a bipartisan effort to stop the EPA from regulating greenhouse gases.

-By Ian Talley, Dow Jones Newswires

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