Letter on CO2 Regulation Under the Clean Air Act

April 9, 2008

The Honorable John Dingell
Chairman
Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC 20515

The Honorable Rick Boucher
Chairman
Subcommittee on Energy and Air Quality
U.S. House of Representatives
Washington, DC 20515

The Honorable Joe Barton
Ranking Member
Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC 20515

The Honorable Fred Upton
Ranking Member
Subcommittee on Energy and Air Quality
U.S. House of Representatives
Washington, DC 20515

Dear Chairmen Dingell and Boucher and Ranking Members Barton and Upton:

The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, applauds your decision to analyze the strengths and weaknesses of regulating greenhouse gas emissions using existing Clean Air Act (CAA) authorities. As the 110th Congress embarks on a path toward aggressive greenhouse gas legislation, it is of critical importance that Congress not overlook the "wild card" of potentially duplicative regulation of greenhouse gases under the CAA. We hope Congress will ultimately acknowledge that the CAA is simply not compatible with the regulation of greenhouse gases, and that it should enact a legislative fix removing greenhouse gases from the purview of the CAA.

Of course, this subject is not particularly new to you. As we understand it, your staffs already know the dangers of regulating greenhouse gases under the existing CAA; they were reportedly responsible for drafting the savings clause in the Energy Independence and Security Act (EISA) that avoided the trigger of CAA requirements by that law's renewable fuels title. It is very clear to the Chamber that the leadership of this Committee and Subcommittee "gets it." For instance, just this week, Energy and Commerce Committee Chairman John Dingell called potential regulation of CO2 under the CAA a "glorious mess." The Chamber echoes that sentiment.

The "glorious mess" Chairman Dingell refers to will be created via the trigger of Prevention of Significant Deterioration (PSD) permitting authority the very second greenhouse gases are considered regulated by the CAA. Should CO2 be deemed "regulated" under the CAA—even if the scope of the regulation is limited to mobile sources or fuels—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 under Section 165 of the CAA. Major sources are defined as either a source in one of 28 listed categories (mostly industrial manufacturers and energy producers) that emits at least 100 tons per year of an air pollutant, or any other source with the potential to emit 250 tons per year [emphasis added] of an air pollutant.

The 250-ton-per-year threshold is generally a non-issue for most regulated pollutants, few non-industrial stationary sources typically reach this ceiling for pollutants such as lead, carbon monoxide or particulate matter. However, CO2 is a completely different animal; most large buildings heated by furnaces using fossil fuels (office and apartment buildings, 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, sports arenas), or businesses that generate or use CO2 naturally as a component of its operations (soda manufacturers, bakers, breweries, wineries) may exceed the 250-ton-per-year threshold for CO2 emissions and trigger PSD.

In 2001, Mark Mills of Mills, McCarthy & Associates analyzed the number and type of stationary sources that would be forced to comply with PSD permitting requirements should CO2 become a regulated pollutant under the CAA. The Chamber is in the process of updating the study for 2008, and will submit a copy for the record when it is complete.

PSD permitting review will be extraordinarily costly and inefficient for ordinary buildings. It is not uncommon for PSD permits for major sources to cost hundreds of thousands or even millions of dollars and take years to complete. PSD permittees will be required to use best available control technology (BACT), determined on a case-by-case basis by the permitting agency. BACT determinations are made at the state level and currently take between 12 and 18 months. Further, agencies will be crippled by the additional hundreds of thousands (possibly millions) of new PSD permits for which BACT must be determined on a case-by-case basis.

Moreover, once a source is classified as a "major" source for one pollutant, it is considered a major source for all other regulated pollutants under the CAA. As a result, the hundreds of thousands (possibly millions) of covered sources may now have to install BACT not only for CO2, but also potentially 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 throughout the nation will literally stop the minute CO2 is "regulated" under the CAA.

The 100/250 ton-per-year threshold was originally set based on emission levels of traditional pollutants, such as particulate matter, nitrogen oxides and sulfur dioxide. Emissions above this threshold were considered to be significant enough to trigger a need for regulation. CO2 differs from traditional pollutants in that 100 or 250 tons per year is not an unusually large amount, and therefore not significant enough to need regulation. The 100/250 ton-per-year PSD threshold was clearly not meant to cover CO2 emissions.

There is an important distinction to be made here. The Subcommittee recognizes that CO2 is not currently regulated under the CAA. There are those who disagree with that statement, and who have made it their goal to trigger PSD and other provisions of the CAA through careful manipulation of the regulatory process and, ultimately, through litigation. This is why the Chamber communicated with Congress on the PSD issue while the EISA was being considered by both houses. Insertion of the savings clause in the EISA, while an effective safeguard against regulation of CO2 by that law, does not protect CO2 from regulation under the CAA through other methods. These methods include, but are not limited to: (1) a greenhouse gas rule for vehicles, fuels, boilers, or any other source under the CAA; and (2) a judicial declaration that Massachusetts v. EPA on its face caused CO2 to be regulated, the argument currently being advanced by Sierra Club in the case In the Matter of Deseret Power Electric Cooperative (Bonanza), PSD Permit No. OU-000204.00 (PSD Appeal No. 07-03).

The good news is, EPA has done its part by seeking an Advance Notice of Proposed Rulemaking (ANPR) in response to the U.S. Supreme Court's remand of Massachusetts v. EPA, in lieu of an endangerment finding or a proposed rule regulating greenhouse gases under the CAA. As the Subcommittee correctly recognizes, regulation of greenhouse gases under the CAA could result in a great deal of detrimental side-effects to America's economy, and these detriments may outweigh any potential benefits of regulation. An ANPR allows interested parties the opportunity to include all the facts in the record and have an honest discussion of the consequences of greenhouse gas regulation under the CAA.

As Congress works to craft legislation aimed at curbing greenhouse gas emissions, legislators must be careful not to assume they alone are working to address the issue. Agency action to regulate greenhouse gases under the CAA alongside climate change legislation could result in a quagmire of overlapping federal laws and regulations and cripple our nation's economy. Avoiding trigger of PSD cannot be done in piecemeal fashion, as has been done to date. The Chamber is not yet convinced that action by EPA to address PSD for CO2—such as a permit by rule, or by raising the threshold for PSD trigger—would withstand judicial scrutiny. This is why the Chamber and others have routinely requested that Congress enact a legislative fix to the entire problem of regulation of greenhouse gases under the CAA. Such a fix would place exclusive jurisdiction over the issue of domestic climate change action squarely where it belongs, before the Congress.

The Chamber thanks you for giving this very serious issue the attention and careful analysis it deserves.

Sincerely,

R. Bruce Josten

Cc: Members of the Committee on Energy and Commerce