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In a recent ruling, In re: Deseret Power Electric Cooperative, PSD Appeal No. 07-03 (EAB Nov. 13, 2008), the U.S. Environmental Protection Agency's Environmental Appeals Board (EAB) rejected the EPA's position that it lacked the authority under the Clear Air Act (CAA) to limit carbon dioxide (CO2) emissions from a coal-fired power plant in Utah and remanded a permit issued to the Utah facility to the EPA for further consideration as to whether it must impose limits on CO2 in the future.  

In its opinion, the EAB expressly acknowledged that its ruling on the EPA's statutory authority or obligation to limit carbon dioxide emissions is "an issue of national scope that has implications far beyond this individual permitting proceeding," and encouraged the EPA to address the issue on a nationwide basis. At a minimum, the EAB's decision will likely slow the permitting process for other coal-fired power plants while the CO2 issue is resolved and may help establish a base for the Obama administration to impose new limits on CO2 emissions. It has been estimated that as many as 100 permit applications for coal-fired electric power plants currently under consideration could be delayed.

The EAB decision resulted from an appeal by Sierra Club of a prevention of significant deterioration (PSD) permit issued by EPA's Region 8 to Deseret Power Electric Cooperative (Deseret). The permit, which was issued in August 2007, authorized Deseret to construct a new waste-coal-fired electric generating unit at an existing facility in Bonanza, Utah. The permit included emissions limits for numerous air pollutants, including particulate matter, sulfur oxides, nitrogen dioxide and carbon monoxide based upon BACT — or best available control technology — but did not include BACT emissions limits for CO2.

The EAB's decision turned on its interpretation of §§ 165(a)(4) and 169(3) of the CAA, which prohibit the issuance of a PSD permit unless the permit includes a BACT emissions limit for "each pollutant subject to regulation under this Act." Specifically, Sierra Club contended that CO2 was a pollutant "subject to regulation" under the CAA, and therefore Region 8's decision to issue a permit for the Deseret facility without applying BACT to limit CO2 was improper. Sierra Club's position was based in part by the United States Supreme Court's decision in Massachusetts v. EPA, 549 U.S. 497 (2007), in which the Supreme Court held that CO2 qualifies as an "air pollutant" under the CAA.  

In response, Region 8 argued that the phrase "subject to regulation under this Act" was ambiguous and thus subject to EPA interpretation. Region 8 further argued that the EPA had historically interpreted that phrase to apply only to pollutants that are subject to a statutory or regulatory provision that requires "actual control" of emissions of that pollutant — which CO2 was not — and that this historical interpretation constrained Region 8 from imposing a CO2 BACT limit.

Ultimately, the EAB rejected the statutory interpretation positions of both Sierra Club and Region 8. In particular, the EAB concluded that the CAA did not require Region 8 to impose a CO2 BACT limit, but also concluded that the EPA was not prohibited from determining whether the phrase "subject to regulation under this Act" precluded the Region from applying a CO2 BACT limit due to historical interpretations of that phrase. Accordingly, the EAB remanded the permit to Region 8 and ordered Region 8 to reconsider whether or not to impose a CO2 BACT limit.