by Judith Schaeffer, Vice President, Constitutional Accountability Center

Late last week, the Environmental Appeals Board (EAB) of the Environmental Protection Agency (EPA) handed down an important ruling in the fight against global warming in In re Deseret Power Electric Cooperative (PSD Appeal No. 07-03). Contrary to some overly optimistic early reports, the ruling does not immediately require new coal-fired power plants to install Best Available Control Technology (BACT) to limit carbon dioxide (C02) emissions. But the ruling should lead to that result, particularly under the incoming Obama Administration.

Here’s the background. Under the Clean Air Act (CAA), before a “major emitting facility” is constructed it must obtain a Prevention of Significant Deterioration (PSD) permit from either EPA or the state. The CAA requires that PSD permits impose BACT emissions limits on each pollutant “subject to regulation” under the CAA. In the Supreme Court’s April 2007 landmark decision in Massachusetts v. EPA, the Court held that CO2 is an air pollutant within the meaning of the CAA, but that case did not deal with whether CO2 is already “subject to regulation” under the CAA . In August 2007, EPA Region 8 concluded that CO2 was not a pollutant “subject to regulation” under the CAA and granted Deseret Power a PSD permit with no limits on CO2 for a new coal-fired electric generating unit at its existing Bonanza Power Plant in Utah.

The Sierra Club challenged the permit before the EAB — an independent body that functions as “the final Agency decision-maker on administrative appeals under all major environmental statutes that the [EPA] administers.”  Sierra Club argued that because the Act requires monitoring and reporting of CO2 emissions, CO2 is a pollutant “subject to regulation” under the CAA and the EPA was therefore required to apply BACT to limit Bonanza’s CO2 emissions.

EPA took the position that it has always interpreted the term “subject to regulation” to mean that the pollutant was subject to a regulatory provision “that requires actual control of emissions of that pollutant,” and that requirements for monitoring and reporting do not suffice to render a pollutant “subject to regulation.” In a classic Bush Administration “funny-if-it-weren’t-true” alternative argument, EPA also argued that the monitoring and reporting requirements were not in fact part of the CAA and thus could not be used as the basis for triggering BACT requirements.

The EAB’s ruling last week was a significant but not complete victory for the Sierra Club. According to the EAB, the term “subject to regulation” is not so “unclear and unequivocal” as to preclude the EPA from “exercising discretion” in deciding what it means. But the EAB rejected EPA’s argument that EPA has historically interpreted the phrase to mean subject to regulations that actually limit emissions. The EAB also made short work of the alternative ground that the monitoring and reporting regulations were not “under” the CAA, finding this argument “at odds with the Agency’s prior statements.”

Accordingly, the EAB sent the Permit back to Region 8 to “reconsider whether or not to impose a CO2 BACT limit in light of the [EPA’s] discretion to interpret, consistent with the CAA, what constitutes a ‘pollutant subject to regulation under [the CAA].’” In concluding its ruling, the EAB correctly observed that the issue of applying BACT to limit CO2 emissions is one of “national scope that has implications far beyond this individual permitting proceeding.” The EAB therefore suggested that Region 8 consider “whether interested persons, as well as [the EPA], would be better served by the [EPA] addressing the interpretation of the phrase ‘subject to regulation under this Act’ in the context of an action of nationwide scope, rather than through this specific permitting proceeding.”

Part II of this analysis will be available tomorrow, when David Bookbinder, Chief Climate Counsel for the Sierra Club, will address what the Bonanza ruling means for the incoming Obama Administration.