Narrowing the Scope of EPA's PSD and GHG Tailoring Rule

The EPA should narrow the scope of its October 27, 2009 Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Proposed Rule (the “Proposed Rule”). The Proposed Rule contemplates phasing in the applicability thresholds for both the Prevention of Significant Deterioration (“PSD”) and Title V programs of the Clean Air Act (“CAA”) for sources of greenhouse gas (“GHG”) emissions. For the reasons set forth below, the EPA should narrow the scope of the Proposed Rule to decrease the adverse impact such a rule would have on an economic recovery.

Finalization of the Proposed Rule Will Delay an Economic Recovery

The EPA’s adoption of the Proposed Rule will lead to American manufacturers who are not currently subject to PSD requirements being subject to that program’s costly requirements. If the Proposed Rule is finalized and adopted, manufacturers who may otherwise create jobs by expanding production facilities to meet increased demand during an economic recovery may refrain from doing so due to such expansions being classified as “major modifications” that would require them to apply for a permit under the PSD program. Moreover, since the EPA is not proposing to establish a significance level for GHGs, any increase in GHG emissions resulting from a facility expansion will trigger PSD requirements.

As you know, under the PSD program not only will the aforementioned “major modifications” trigger a permitting requirement that will inundate state implementing agencies with permit applications due to the large number of facilities that will fall under the scope of the program, but will also require the implementation of costly best available control technology and extensive environmental analyses. Collectively, these hurdles will create a disincentive for manufacturers to expand their operations, thereby costing the economy numerous jobs at a critical time in the nation’s recovery.

Finalization of the Proposed Rule Will Result in Anti-Competitive Effects

The EPA’s finalization of the Proposed Rule in its current form will increase the cost of compliance of meeting such standards for American manufacturing companies. The increased cost of compliance impedes the ability of American manufacturers to remain competitive in a global marketplace, especially when competitors manufacturing in other countries are either exempt from complying with such standards or whose governments impede the transparency required for international monitoring of adherence to similar standards. As such, foreign competitors derive the economic benefit of revenue from sales in the United States without the burden of bearing the cost of compliance with such stringent standards.

Given the cost of complying with current standards, it should come as no surprise that more than 3.1 million manufacturing jobs were lost in the United States during the last seven (7) years. If the Proposed Rule is finalized in its current format, American manufacturers’ overhead costs will further increase, making them less competitive in the global marketplace.

It is well established that under Section 160 of the Clean Air Act (“CAA”), the purpose of the PSD program is to “insure that economic growth will occur in a manner consistent with the preservation of existing clean air resources.” 42 U.S.C. § 7470 (1977). However, the burdens imposed on manufacturers by the Proposed Rule may deter the expansion of production capacity essential for economic growth. Moreover, another stated purpose of the PSD program is “to protect the public health and welfare. . .” Id. Certainly, a rule that results in the loss of jobs and a decrease in the standard of living of American workers cannot be construed to be beneficial to public health. Indeed, a rule likely to cause more harm to health than it prevents is not a rule that is “requisite to protect the public health.” Whitman vs. American Trucking Associations, 531 U.S. 457, 495 (2001).