Election May Spur EPA To Delay Next Emissions Transport Rule For Years

EPA might stall its plans to issue this summer a second-phase cap-and-trade rule to cut power plant emissions for several years due to the controversy over the recently finalized first phase rule, with sources saying the agency wants to avoid stepped-up political opposition to a stricter second rule during the 2012 election cycle.

When EPA first proposed its Clean Air Transport Rule (CATR) trading system in August 2010 it vowed to follow through with a stricter second phase that could have captured more sources than just power plants and also expanded the scope of the rule beyond the 31 states and the District of Columbia that CATR would have captured. EPA planned to issue a second-phase rule this summer, with sources expecting it to set tighter caps than phase one.

But one clean air activist says a second-phase rule that could capture additional source categories such as cement kilns or industrial boilers -- which are already subject to strict emission controls under other EPA rules -- would clearly trigger even greater political opposition, something that the White House is keen to avoid during the 2012 election cycle. "I would expect [phase two] to be delayed significantly. It is certainly not going to be this summer," the source says.

EPA last month issued the final renamed Cross-State Air Pollution Rule (CSAPR) that implements nitrogen oxide (NOx) and sulfur dioxide (SO2) trading programs in 27 states, but made little mention of a second-phase rulemaking in the announcement, prompting suggestions that a second rule may now be years away.

Agency air chief Gina McCarthy recently told industry stakeholders only that "it has not been determined" when the new proposal will be released, according to an industry source. That clashes with EPA's statements in the CATR proposal that it planned to issue a second-phase rule after it released the final first phase regulation.

CATR was designed in part to help states meet EPA's ozone national ambient air quality standard (NAAQS), as it would have cut NOx emissions that contribute to ozone formation. At the time of the proposal in August, EPA was planning to issue a final rule the same month, revising and tightening the Bush EPA's ozone NAAQS.

In the proposal, EPA said that if it issued a more protective standard in August it would propose a second interstate air pollution transport rule in 2011 to help states meet that NAAQS, with a final rule due in 2012.

EPA subsequently won a federal appeals court's approval to punt the self-imposed, non-binding deadline for issuing the revised ozone NAAQS to July, which would have conceivably punted a proposed second trading rule to 2012 and a final rule sometime in 2013. EPA subsequently July 26 announced it will delay issuance of the new ozone standard again for an unspecified time. Beyond further slippage in the timetable for release of a second transport rule this may cause, sources say that political opposition might prompt an even more extensive delay to the transport rule.

The agency in the final CSAPR makes only brief reference to its plans to develop a second transport rule targeting ozone pollution. "EPA, as commenters noted, intends to propose a second rule to address interstate transport of ozone that will be appropriately configured for the revised level of the ozone NAAQS after reconsideration of the 2008 standard is finalized," the agency says in the rule. The rule is also designed to help states meet EPA's particulate matter (PM) ambient air standards by reducing power plant emissions of SO2 and NOx that contribute to PM formation.

An EPA spokeswoman in a written response to questions says, "Once [fine PM] and ozone standards have been finalized, EPA can then begin to analyze any interstate transport reductions needed to meet updated air quality standards."

Ozone NAAQS Revision
EPA's pending revision to the ozone NAAQS is currently undergoing White House Office of Management & Budget review, while the agency has begun the process of reviewing its existing PM standards.

Should EPA tighten the standards it could put more areas of the United States out of attainment with both the ozone and PM NAAQS, triggering a Clean Air Act requirement for states to craft air quality plans outlining the pollution controls they intend to impose on industrial sources to cut NOx and SO2 and meet the standards. But states say they have few options left and must rely on federal pollution rules to help secure pollution cuts to meet the NAAQS.

CSAPR should help the states meet the existing ozone and PM standards, though the agency has said that CSAPR will not ensure all areas meet even the Bush-era ozone NAAQS of 75 parts per billion. If EPA tightens either standard then states will likely put pressure on EPA to issue a second-phase rule to win further SO2 and NOx cuts.

State organizations such as the National Association of Clean Air Agencies and the Ozone Transport Commission, representing air officials in Mid-Atlantic and Northeastern states, have told EPA in comments that the CSAPR's scope must be enlarged to include industrial boilers and possibly other sources in addition to power plants.

If a stricter ozone NAAQS brings many new areas of the country into NAAQS nonattainment for the first time, observers including congressional staff and state regulators have also questioned whether EPA might find it necessary to expand the geographical scope of the rule to include Western states exempt from CSAPR.

Strong push-back to the final first-phase transport rule from Republicans and others could, however, imperil any attempt by EPA to quickly issue a second-phase rule, possibly delaying it for years, sources say.

Senate Environment & Public Works Committee ranking member James Inhofe (R-OK), in a statement shortly after CSAPR's release, called it "the latest major impediment to economic growth put forth by this Administration," claiming it will cause many power plant retirements and major job losses, and increase electricity prices.

Fellow environment panel member Sen. John Barrasso (R-WY) said, "Today's economically devastating rule is just the latest strike in the Administration's ongoing war against traditional sources of American energy."

A second environmentalist says there are several procedural hurdles that will likely delay a second CSAPR. Normally, EPA would have to set the final ozone NAAQS before undertaking air quality modeling in support of a new rule, then draft a proposal based on that data. The agency also would normally wait for states and the agency to complete air quality designations for nonattainment areas under the new NAAQS before proposing a new rule. Completing designations and required modeling would normally take several years, sources say.

These factors could help EPA justify pushing finalization of a new rule beyond the next presidential and congressional elections "without attributing that to a nefarious political motive," the source says.

An industry source says EPA has previously said it would move very fast on designation of nonattainment areas under the new ozone NAAQS, using an accelerated process that could take as little as a year. Even if a novel process allowed for designation of nonattainment areas by August 2012, the necessary modeling and drafting for a new proposal would still take many months beyond that, the source says, noting that EPA set its schedule for a summer 2011 proposal based on the belief that ozone NAAQS would be final in August 2010.

Source: Inside Cal/EPA
August 3, 2011

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