CO2 Regulation Could Crush Building Construction

Published March 1, 2008

The Energy Independence and Security Act (P.L. 110-140, H.R. 6), signed into law by President George W. Bush in December, contained a Clean Air Act (CAA) savings clause wisely inserted into the renewable fuels title by its drafters.

The savings clause ensures any regulation of carbon dioxide (CO2) required by the renewable fuels standard in the act will not trigger costly, onerous stationary source control requirements for hundreds of thousands of buildings in the United States.

However, the savings clause does not solve the ultimate problem: If the Environmental Protection Agency (EPA) ever decides to regulate greenhouse gases, it would trigger the very same stationary source controls.

As a result, construction on any new or existing source with the potential to emit more than 250 tons of CO2 per year–which includes most large buildings–could come to a screeching halt.

The only effective way to prevent such a problem is through a legislative fix exempting CO2 and all other greenhouse gases from Prevention of Significant Deterioration (PSD) permitting authority under section 165 of the CAA. PSD requires a permit review for all new and modified stationary sources in CAA attainment areas. The new source must implement best-available control technologies (BACT) to control future emissions.

Construction, Changes Impeded

Under CAA, should CO2 be deemed “regulated” under the act–even if the regulation is for vehicles or fuels and is specifically not directed at stationary sources–no new or existing “major” stationary source of CO2 can be built or modified, if the modification increases net emissions, without first obtaining a PSD permit.

Major sources are defined as places either belonging to one of 28 listed categories (mostly industrial manufacturers and energy producers) that emit at least 100 tons per year of an air pollutant, or any other source with the potential to emit 250 tons per year of an air pollutant.

This latter category is particularly troublesome because most large buildings heated by furnaces using fossil fuels (office and apartment buildings, and even some very large homes), or buildings of any size using natural gas as a cooking source in a commercial kitchen (such as restaurants, hotels, for-profit hospitals and nursing homes, malls, and sports arenas), or businesses that generate or use CO2 naturally as a component of their operations (soda manufacturers, bakers, breweries, wineries) may exceed the 250 tons per year threshold for CO2 emissions.

Threshold Too Low

The 100/250 tons per year threshold was originally based on emission levels of traditional pollutants such as particulate matter, nitrogen oxides, and sulfur dioxide. Emissions above this threshold were considered significant enough to trigger a need for regulation.

However, CO2 differs in that 100 or 250 tons per year is not an unusually large amount significant enough to trigger the same need for regulation. The 100/250 tons per year PSD threshold was clearly not meant to cover CO2 emissions.

Delays, Inconsistency

The PSD permit process is incredibly costly and time-consuming. It is not uncommon for PSD permits to cost hundreds of thousands or even millions of dollars and take years to complete.

PSD permittees are required to use BACT, determined on a case-by-case basis by the permitting agency. BACT is determined at the state level and will thus vary from state to state. Some states may decide BACT requires energy efficiency measures, while others could decide it requires replacing a coal-fired power plant with a wind farm. The BACT process currently takes 12 to 18 months.

If greenhouse gases are regulated under CAA, agencies will be crippled by the additional hundreds of thousands (possibly millions) of new PSD permits for which BACT must be determined individually.

Additional Requirements

As if this were not enough, once a source is classified as a “major” source for one pollutant, it is considered a major source for all other regulated pollutants under CAA. As a result, the hundreds of thousands (possibly millions) of covered sources may have to install BACT not only for CO2 but also for nitrous oxide, particulate matter, lead, mercury, sulfur dioxide, and other pollutants prior to any new construction.

The regulatory burden is so enormous, and the number of required PSD permits so staggering, that construction in cities across the country will literally stop the minute CO2 is “regulated” under the act.

Should EPA ever decide to regulate CO2–either by regulating vehicles and fuels in response to the Supreme Court’s 2007 Massachusetts v. EPA decision or for any other reason–PSD will immediately be triggered for all stationary sources that meet the 100/250 tons per year “major” source threshold.

Although EPA could address the problem through various regulatory options (such as a permit by rule or a de minimis exception), none is nearly as clean or effective as a pure legislative fix.

The only certain way to solve the PSD quandary is through legislation exempting CO2 and all other greenhouse gases from PSD permitting authority under CAA section 165.

William L. Kovacs ([email protected]) is vice president of the U.S. Chamber of Commerce Environment, Technology, and Regulatory Affairs Division.