On June 29, 2012, the Environmental Protection Agency (“EPA”) finalized Step 3 of its Greenhouse Gas Tailoring Rule, but decided not to lower the 75,000 and 100,000 ton-per-year emission thresholds that currently allow minor sources of greenhouse gases to avoid permitting requirements.  In the original 2010 rule that established Steps 1 and 2, EPA had promised to consider lowering the thresholds to 50,000 tons per year in Step 3.  However, citing the struggling economy, significant decreases in state agency budgets, and a lower-than-expected demand for greenhouse gas permits during the past year, EPA determined that states, regulated sources, and EPA itself did not yet have sufficient experience or resources to justify expanding the program to smaller sources by lowering the thresholds. 

After deciding to leave the current thresholds in place, EPA also addressed two “streamlining” measures that it had proposed in March.  First, EPA revised the Tailoring Rule to allow the use of “Plant-wide Applicability Limits” or “PALs” to avoid greenhouse gas permitting.  In essence, a “PAL” is an emission limit established to ensure that an existing source’s emissions do not exceed “major modification” permitting thresholds.  For example, EPA’s rule confirms that a facility currently emitting 500,000 tons per year of greenhouse gases can accept a “PAL” of 575,000 tons per year to avoid permitting, freeing it to modify its facility so long as its total greenhouse gas emissions remain below that level. 

EPA did not finalize its proposal to allow sources located in areas where EPA is the permitting authority to use “synthetic minor” permits.  Such permits are designed to ensure a source remains below “major source” thresholds (for example, by establishing an emission limit of 99,999 tons per year of greenhouse gases).  EPA noted in its proposed rule in March that most states already have the authority to approve synthetic minor permits, but EPA’s final Step 3 rule nevertheless declines to adopt similar authority into EPA’s own rules. 

EPA’s decision to retain the current greenhouse gas permitting thresholds comes on the heels of a decision by the U.S. Court of Appeals for the D.C. Circuit to uphold the Tailoring Rule generally against challenges from industry and states that the rule conflicts with the Clean Air Act.  Therefore, unless the U.S. Supreme Court accepts an appeal of the D.C. Circuit’s decision, these events suggest that the current greenhouse gas permitting rules are likely to remain on the books indefinitely.