Environmental Law ReSource : Environmental Lawyer & Attorney : Reed Smith Law Firm : Climate Change, Sustainability

The aggregation concept derives from the U.S. Environmental Protection Agency’s (EPA’s) original definition of a “source” in its Prevention of Significant Deterioration (PSD) regulations, a subsequent court decision (Alabama Power v. Castle, 636 F.2d 323 (D.C. Cir. 1979) and EPA’s current definition of stationary source (found at 40 CFR 52.21(b)(5)). EPA’s definition of “stationary source” under the PSD regulations is “a building, structure, facility or installation which emits or may emit a regulated pollutant.” A building, structure, facility or installation must meet three criteria:

i. under common control of the same person (or persons under common control);

ii. belong to same industrial grouping (activities will be considered as part of the same industrial grouping if they use the same two-digit major or Standard Industrial Classification (SIC) code identification); and

iii. located on one or more contiguous or adjacent properties.

See 40 C.F.R. § 52.21(b)(6).

Pennsylvania DEP’s Proposed Single Source Guidance

The DEP announced yesterday an interim technical Guidance for Performing Single Stationary Source Determinations for Oil and Gas Industries, (the 'Single Source Guidance") effective October 12, 2011. The Single Source Guidance addresses all three prongs of the definition of stationary source mentioned above, as follows:

Sources under the Common Control of the Same Person

Under the Single Source Guidance, common control is established when both facilities are owned by the same parent company or a subsidiary of the parent company. Further, the Single Source Guidance clarifies that common control may also be established if an entity has decision-making authority over the operation of a second entity through a contractual agreement or voting interest.

Same Industrial Groupings

Under the PSD and Title V permitting programs, pollutant-emitting activities are considered to be part of the same industrial grouping if they have the same first two-digit SIC code. The Single Source Guidance clarifies that, in addition, a support facility is considered to be part of the same industrial grouping as that of the primary facility it supports even if the support facility has a different two digit SIC code, as defined in 40 CFR Part 52.21(b)(6). Support facilities under the Single Source Guidance are typically those that “convey, store or otherwise assist in the production of the principal product."

In addition to PSD permits, the Single Source Guidance would also apply to Non-Attainment New Source Review (NSR) permits. For Non-Attainment NSR permits, the SIC code requirement would not apply.

Contiguous or Adjacent Properties

The Single Source Guidance makes it clear that “contiguous” or “adjacent” means the distance or spatial relationship between locations. The DEP guidance states that spatial distance, not interdependence, is the overarching factor in determining whether sources shall be aggregated. This concept is true to EPA regulations and rejects certain EPA letters and informal opinions that have impermissibly transformed the concept of “contiguous” and “adjacent” to mean “interdependent.”

The Single Source Guidance takes the extra and necessary step by adding a “rule of thumb” to this “spatial” notion that properties located a quarter mile or less apart “are considered” contiguous or adjacent properties for PSD, nonattainment NSR and Title V applicability determinations. Single source determinations for properties located beyond this quarter-mile range will be considered on a case-by-case basis.

Potential Impact of DEP’s Proposed Single Source Guidance

Because the Single Source Guidance is a policy and not a regulation, even when finalized its effect will only be to assist DEP permit writers in conducting their case-by-case aggregation analysis, but it will not be a formal mandate. Existing appeals pending before the Environmental Hearing Board, including Group Against Smog and Pollution v. DEP and Laurel Mountain Midstream Operations LLC (EHB Docket No. 2011-065-R) and Clean Air Council v DEP and MarkWest Liberty Midstream and Resources (EHB Docket No. 2011-072-R) will likely have to include an evaluation of whether the challenged DEP determination would have been different if the proposed policy were used as guidance.

DEP will accept public comment on this guidance until November 21, 2011. 

First, why does biomass get special treatment? In short, two words: carbon cycle. The combustion (direct or indirect) of biomass as a fuel indisputably places CO2 in the atmosphere. But this carbon is part of the current carbon cycle: it was absorbed during the growth of the biomass over the previous few months or years and, provided the land continues to support growing plant material, a sustainable balance is maintained between carbon emitted into the atmosphere and absorbed into the biomass. In sum, the carbon used to construct biomass is absorbed from the atmosphere as carbon dioxide (CO2) by plant life, using energy from the sun.

Second, what is biomass? While it can mean different things to different people, this post cares about how USEPA defines it. USEPA defines biomass as “biogenic CO2 emissions,” in turn defined as emissions of CO2 from a stationary source directly resulting from the combustion or decomposition of biologically based materials other than fossil fuels. Examples include, but are not limited to:

• CO2 generated from the biological decomposition of waste in landfills, wastewater treatment or manure management processes
• CO2 from the combustion of biogas collected from biological decomposition of waste in landfills, wastewater treatment or manure management processes
• CO2 from fermentation during ethanol production
• CO2 from combustion of the biological fraction of municipal solid waste or biosolids
• CO2 from combustion of the biological fraction of tire-derived fuel
• CO2 derived from combustion of biological material, including all types of wood and wood waste, forest residue, and agricultural material

It is important to note that non-CO2 emission from combustion of biomass (methane, nitrous oxide) are not part of USEPA’s definition and thus are not subject to the Proposed Deferral and Guidance.

The applicability to both PSD and the Title V programs is dependent on whether the stationary source meets certain emissions thresholds. On June 3, 2010, USEPA issued the Tailoring Rule and established two steps to implement PSD and Title V. Tailoring Rule Step 1 began January 2, 2011. Step 1 applies to sources subject to PSD or Title V anyway because of their emissions of other pollutants (“anyway” sources) and that have the potential to emit 75,000 tpy CO2e (or to increase emissions by that amount for modifications). Tailoring Rule Step 2 begins July 1, 2011. In addition to anyway sources, Step 2 applies to new facilities emitting GHGs in excess of 100,000 tpy CO2e, and facilities making changes that would increase GHG emissions by at least 75,000 tpy CO2e, and that also exceed 100/250 tpy of GHGs on a mass basis.
The question raised by these threshold determinations is: does biomass “count” for purposes of meeting these thresholds?

To answer this question, USEPA published a Call for Information in July 2010 to obtain scientific and technical information concerning GHG resulting from the use of biomass and PSD. Some data supported the conclusion that certain biomass materials, such as waste whose inevitable decomposition will result in greenhouse gas emissions anyway, have only very limited climate impacts when combusted as fuel. However, other data indicated that the use of certain other biomass as fuel could have more significant climate impacts.

This contradiction led USEPA to announce January 12, 2011 that it will undertake an expedited rulemaking to be completed by July 1, 2011 to defer application of pre-construction permitting requirements to biomass for a period of three years. During that time, USEPA proposed to initiate a scientific examination with partners from other federal agencies and scientists outside the government with relevant expertise to assist the agency in determining how CO2 emissions from biomass should be handled under PSD. Further, in the interim, USEPA indicated it will issue guidance that states and local agencies can use to conclude that BACT for GHG at biomass sources is combustion of biomass fuels alone.

Summary of Three Significant Issues in Proposed Deferral and Guidance
As noted above, the Proposed Deferral and Guidance take significant actions with regard to (1) timing, (2) applicability, and (3) the co-firing question.

Timing and the Proposed Deferral
First, note that no biomass source is deferred until the Proposed Deferral is finalized as a final rule. USEPA indicated final action on the Proposed Deferral by July 2011. This is a very ambitious timeline, particularly in light of the admissions by USEPA in the Proposed Deferral that the deferral of biomass will require State Implementation Plan revisions for certain states under the Clean Air Act. These facts call into question whether USEPA can meet the deadline of July 2011. And keep in mind that as the deadline is extended, it increases the likelihood that PSD and Title V permitting provisions will apply to biomass sources.

Applicability and the Proposed Deferral and Guidance
The scope of the Proposed Deferral is wider than the scope of the Guidance. Whereas the Proposed Deferral applies to “all sources of biogenic CO2 emissions,” the Guidance applies merely to “bioenergy facilities.” This means that to the extent a biomass facility does not fit into the definition of “bioenergy facility,” the source is left without guidance (except as biomass is addressed in the GHG BACT guidance) with regard to the applicability of the PSD and Title V programs until the Proposed Deferral is finalized (again, potentially a longer period of time than optimistically estimated by USEPA).

The good news is that the Guidance definition of “bioenergy facility” is quite broad and defined as “a facility that generates energy via the combustion of biologically-derived material other than fossil fuels, for example, wood, biosolids, or agricultural products. This could be undertaken either alone or in addition to traditional fossil fuels.” See Guidance, footnote 1. The last sentence of the definition includes co-firing or mixed fuel facilities – and greatly extends the reach of the Guidance.
However, even if the facility qualifies as a “bioenergy” facility, USEPA has left the door open to walk away from a strict application of the Guidance by stating that USEPA believes the analysis described in Guidance will be sufficient in most cases to support the conclusion that utilization of biomass fuel alone is BACT for a bioenergy facility.
 

The Co-Firing Question
The Proposed Deferral states that for stationary sources, co-firing fossil fuel and biologically based fuels and/or combusting mixed fuels (e.g., tire-derived fuels, municipal solid waste), the biogenic CO2 emissions from that combustion are included in the deferral. However, the fossil CO2 emissions are not.

USEPA acknowledged that various methods are available to calculate that fraction of biogenic CO2 emissions from co-firing facilities. USEPA is specifically requesting comments regarding: (1) whether the deferral should specify whether co-firing biomass faculties should use a specific method for determining biogenic CO2 emission; and (2) other ways to ensure there is an accurate estimate of how much biogenic CO2 is subject to deferral at co-firing facilities, particularly when combusting mixed fuels. This is an important opportunity for co-firing facilities’ voices to be heard on this important issue.

As background, new major stationary sources and major modifications at existing major stationary sources are required under the Clean Air Act to obtain an air permit before commencing construction. If the new source or major modification is planned for an area in which the national ambient air quality standards (NAAQS) are met or are “unclassifiable,” PSD requirements apply. PSD requirements obligate any new major stationary sources and major modifications to apply BACT for the source. Since there are no NAAQS for GHGs (or any proposed by USEPA), the entire United States is “unclassifiable” for GHG and subject to PSD, so all new major stationary sources and major modifications to which GHG emission regulations apply will require BACT for GHG emissions.

So . . . what is BACT in the context of GHGs? And how would a regulated entity achieve BACT? Broadly speaking, BACT is an emissions limitation that is based on the highest degree of control that can be achieved by a particular facility. But the guidance does not define or require a specific control option for a particular type of source because BACT is to be determined on a case-by-case basis. This new guidance provides the basic information that permit writers and applicants need to address GHGs. With regard to PSD and GHGs, not surprisingly USEPA recommends that permitting authorities use the BACT process to look at all available emission reduction options for GHGs. After taking into account technical feasibility, cost and other economic, environmental and energy considerations, permitting authorities should narrow the options and select the best one. USEPA anticipates that, in most cases, this process will show that the most cost-effective way for industry to reduce GHG emissions will be through energy efficiency.

Interestingly, USEPA is soliciting public feedback on the guidance over the next few weeks on any aspect of the guidance that contains technical or calculation errors, or where the guidance would benefit from additional clarity.

In the next week, we will be providing analysis on portions of the guidance that should be of interest to you and your facilities. The first of these niche publications will address Title V permitting under the guidance for sources with pending Title V renewal applications not issued in draft before January 2, 2011. Stay tuned.