Major pieces of legislation from the Hill, blockbuster rulemakings, and Supreme Court cases get all the policy headlines. Sometimes, though, small things can make just as much of an impact. Last week’s completion by the EPA of a proposed revision to an internal memo —the Johnson Memorandum—could be an example of this, though it looks like it will be most notable for maintaining the status quo. Still, it’s interesting to look at what impact it could have made (and may yet, if the final version is different).
The memo and today’s revision have to do with a bit of Clean Air Act (CAA) arcana: which polluters have to get preconstruction permits to build new plants or modify existing ones? This question seems superficially to be interesting to only the most pedantic of CAA wonks, but the answer has real effects for the cost and effectiveness of policy.
These permits are a big deal. They are expensive and time-consuming to get and require facilities to install the “best available control technology” (BACT). Since the EPA will very shortly regulate greenhouse gas tailpipe emissions, the question has pressing relevance. The EPA’s controversial “tailoring rule” is aimed at minimizing the impact of these permit requirements (called PSD in CAA lingo) by restricting them initially to larger sources. But the even more immediate question of when those large sources have to get permits is determined elsewhere in the Johnson Memo. For more on how these pieces fit together, see the chart here.
The EPA has traditionally required only emitters of pollutants subject to actual control under the CAA to get PSD permits. This means that emitters of pollutants that are only reported, not regulated, don’t have to get permits. It also means that emitters don’t have to get permits until regulation actually forces action; regulation just being announced isn’t enough. The Johnson Memo, released in 2008 by the Bush-era EPA and named for the then EPA administrator, confirmed this traditional approach.
Now that the EPA is about to regulate GHGs, the agency is reopening this issue. If you thought that the 19-page Johnson Memo was a comprehensive treatment, get ready for the 77-page reconsideration. In the proposed version of reconsideration (released last year), the EPA claims its preferred option is to stick with the traditional approach. This would probably result in permit requirements for GHGs beginning in January 2011, according to Administrator Lisa Jackson’s letter to Congress last week. But the proposed reconsideration mentions alternatives, such as a permit requirement when an endangerment finding for a pollutant is made, or even when reporting is required. If one of these options is chosen by the EPA in the final reconsideration, emitters will require permits now (since GHGs are subject to reporting in 2010 and an endangerment finding was made in December).
As Jeff Holmstead of Bracewell & Giuliani discussed at RFF’s Clean Air Act event last week, this timing issue really matters for emitters. If an emitter has a new plant or modification awaiting a permit, whether a permit application is processed before or after GHGs become part of the BACT inquiry is very important. Uncertainty makes planning difficult. Combined with the uncertainty surrounding the tailoring rule, GHG emitters are unsettled and unhappy. Unsettled and unhappy industries tend to sue agencies and lobby Congress. Environmentalists also care about timing. They want GHGs to be a part of the permit process as soon as possible, and are likely to exert pressure of their own.
Since the Johnson Memo and the new reconsideration of it are EPA interpretations of its own statutes, they are very hard to challenge in court (they are entitled to Chevron deference). This makes pressure on the agency directly (through the comment process) or indirectly (through Congress) the most likely avenues of attack from either side.
Since the proposed reconsideration confirms the existing approach, I think it will be relatively unchanged in its final form. If the EPA does pursue a change in this policy, however, the effects will be large. This is just one of countless illustrations of how, in Washington as much as anywhere, the little things matter.
Nathan Richardson is a Visiting Scholar at RFF.
