Environmental Business Alert

EPA Moving Forward with Controversial Guidance on Clean Water Act Jurisdiction
The Office of Management and Budget's ("OMB") Office of Information and Regulatory Affairs is reviewing a controversial guidance document from EPA and the U.S. Army Corps of Engineers that clarifies and expands the scope of waters subject to Clean Water Act ("CWA") regulatory programs. The guidance, originally published for comment on May 2, 2011, was stalled for several months while the agencies reconsidered the path forward after receiving comments from the public and members of Congress questioning the agencies' legal authority to implement changes to CWA programs through guidance rather than notice-and-comment rulemaking. Recent remarks from officials in EPA's Office of Water indicate that the agencies are working on a rulemaking, but it appears the agencies are moving ahead with the guidance in the interim. The proposed guidance would expand the scope of regulated waters by applying the "significant nexus" standard from Justice Kennedy's plurality opinion in Rapanos v. United States, 547 U.S. 715 (2006). This standard would find CWA jurisdiction over a body of water if it, either alone or in combination with similarly situated waters in the region, significantly affects the chemical, physical, and biological integrity of a navigable water or an interstate water. For example, unconnected wetlands may have a significant nexus to a navigable or interstate water if the wetland serves to trap flood water, impurities, or surface runoff that would otherwise flow into major waterways and impact water quality or contribute to downstream erosion. The proposed guidance would apply to all CWA programs, and would subject some parties to CWA requirements for the first time.

EPA Proposes "Step 3" of the Greenhouse Gas Tailoring Rule
A March 8, 2012 proposed rule sets out EPA's third step to phase in greenhouse gas ("GHG") permitting requirements under the Prevention of Significant Deterioration and Title V programs of the Clean Air Act. Under Step 2, which became effective on July 1, 2011, PSD permitting requirements apply to new sources that emit or have the potential to emit 100,000 tons per year ("tpy") or more carbon dioxide equivalent ("the GHG emission threshold") and existing facilities meeting the GHG emission threshold that undertake a modification increasing GHG emissions by at least 75,000 tpy. In addition, Title V permitting requirements apply to new and existing sources meeting the GHG emission threshold. As EPA recognized when it first promulgated the GHG Tailoring Rule, applying the statutory major source applicability thresholds of 100 or 250 tpy per regulated pollutant for PSD preconstruction permits and 100 tpy for Title V operating permits to GHGs would lead to an "absurd result." Many small sources would be burdened by the costs of individualized PSD control technology requirements and permit applications, and state permitting authorities would be paralyzed by enormous numbers of these permit applications. Accordingly, the Agency decided to "tailor" the PSD and Title V programs to GHGs by phasing in the programs' applicability.

In EPA's view, state permitting authorities still do not have sufficient capabilities and resources to regulate a broader universe of sources, and so the Step 3 proposal would maintain the current GHG permitting threshold. The Agency further proposed two "streamlining" provisions: (1) revising the PSD regulations to provide for voluntary, enforceable GHG plant-wide applicability limitations ("PALs"), which would allow sources to make facility changes without triggering PSD permitting requirements, provided emissions do not exceed the PAL; and (2) adding GHG "synthetic minor" permitting provisions to the federal PSD implementation program to allow sources with only the potential to meet the GHG emission threshold, but which do not actually meet the threshold, to voluntarily accept enforceable limits on their GHG emissions to avoid triggering PSD permitting requirements. Stakeholders must submit comments by April 20, 2012.

EPA Withdraws Direct Final Rule Approving New Renewable Fuel Sources and Production Processes
EPA has withdrawn a direct final rule promulgated on January 5, 2012, which approved several new renewable fuel feedstocks and a new biodiesel production process. The direct final rule would have allowed companies to produce renewable fuel from camelina oil, energy cane, giant reed, and napiergrass, but EPA received adverse comments on the rule. As is often the case, EPA had published a parallel proposed rule in the event it receives comments opposing the direct final rule. Thus, EPA will finalize its proposal after addressing all the comments without initiating a second comment period.

EPA to Conduct Additional Tests for Wyoming Fracking Study
In response to criticism from industry and state officials questioning the scientific integrity and findings of EPA's draft hydraulic fracturing report for Pavillion, Wyoming, the Agency announced it will conduct additional testing of deep monitoring wells in the local aquifer. In developing and implementing the protocol for the next phase of sampling and testing, EPA will partner with Wyoming, the United States Geological Survey, and the Tribes. The Agency intends to revise the draft report to include the new data. To allow consideration of the new findings, the Agency is extending the public comment period through October 2012 and delaying peer review of the revised draft report.

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