EPA Regulation of Greenhouse Gases: The View from Washington Troutman Sanders LLP/Trinity Consultants July 20, 2010 PRESENTED BY Peter Glaser Troutman Sanders LLP 401 9th Street, NW Suite 1000 Washington, DC 20004 202.274.2950 www.troutmansanders.com

Topics Endangerment Finding Light-Duty Vehicle (LDV) Rule Johnson Memo Reconsideration Tailoring Rule EPA GHG BACT Guidance NSPS Litigation

Endangerment Finding 74 Fed. Reg. 66496 (Dec. 15, 2009) Endangerment Finding: elevated concentrations of six GHGs constitute “air” pollution endangering public health and welfare: CO2, CH4, N20, HFCs, PFCs and SF6 “Cause or Contribute” Finding: the four of these GHGs that are emitted by new light-duty motor vehicles cause or contribute to this air pollution (CO2, CH4, N20, HFCs) EPA: These findings trigger a requirement that we regulate GHG emissions from new light-duty motor vehicles

LDV GHG Rule 75 Fed. Reg. 25324 (May 7, 2010) Joint DOT MPG - EPA gCO2/mi. standard Key Point – EPA: EPA regulation of GHG emissions from LDVs makes the six GHGs regulated air pollutants under the PSD and Title V permit programs

Johnson Memo Reconsideration (75 Fed. Reg. 17004 (Apr. 2, 2010) Affirms Administrator Johnson’s 12/08 Memo that GHGs are not regulated air pollutants under PSD and Title V until EPA issues regulations actually controlling GHG emissions. Rejects environmental group position that GHGs were first regulated in 1990 CAA Amendments. EPA’s auto rules are such regulations triggering regulation of GHGs under PSD and Title V GHGs will be deemed to be regulated under PSD and Title V beginning 1/2/11 when auto rule “takes effect” Will apply to any PSD permit then in process Prior to 1/2/11: (a) states encouraged to use BACT for non-GHGs to reduce GHGs and (b) any state authority to require GHG BACT before 1/2/11 preserved

Tailoring Rule 75 Fed. Reg. 31514 (Jun. 3, 2010) Addresses problem that statutory PSD thresholds are 100/250 tpy and Title V threshold is 100 tpy. Literally millions of sources have PTEs above 100 tpy for GHGs Provides for 4-step phase-in (tailoring) of requirements - Step 1 - 1/2/11: Sources subject to PSD “anyway” will be required to do GHG BACT if increase emissions by 75,000 tons per year. Title V only for “anyway” sources. - Step 2 - 7/1/11: New sources above 100,000 tpy and existing sources that increase emissions by 75,000 tpy subject to PSD. Title V threshold = 100,000 tpy.

Tailoring Rule Step 3: EPA will do rulemaking commencing 2011 and concluding 7/1/12 to determine lower thresholds, but commits that no source below 50,000 tpy will be regulated for six years. Also look at streamlining and possible permanent exemption of “certain smaller sources.” Step 4 - future study to determine whether sources with lower thresholds will be regulated and how, complete a rule by 4/30/16.

Problem with State Regulation Many States run their own PSD and Title V programs under state law EPA recognizes tailoring rule may not allow states, under state law, to avoid regulating sources down to statutory 100/250 tpy thresholds Final tailoring rule: states may “interpret” their laws to regulate only sources exceeding tailoring rule thresholds But asks states to confirm by 8/2 that they can do so Further regulatory proposal in process to address this issue

EPA GHG BACT Guidance CAAAC GHG Task Force Phase one report 2/10 on policy issues Phase two report soon on using energy efficiency as GHG BACT EPA sector-by-sector technical guidance rolling out beginning this Summer ORD GHG Mitigation Strategies Database RACT/BACT/LAER Clearinghouse Enhancements GHG Control Measures White Papers Policy guidance by end of year

New Source Performance Standards Expect NSPS for CO2 from various source categories already listed and possibly for currently unlisted EGU coal boilers: proposed and finalized in coordination with EGU MACT? Proposed 3/11, final 11/11? Expect eventual adoption of NSPS for new and modified sources and then existing-unmodified sources

Litigation Appeals filed by numerous industry groups of endangerment finding, Johnson Memo Reconsideration and LDV Rule. Deadline for filing appeal of tailoring rule is 8/2 Only one environmental group has filed a challenge of any of the regs – of Johnson Memo Reconsideration 17 states on each side Stay of regulation? Don’t expect decision until latter part of 2012 at best