1. Copyright Holland & Hart LLP 2008. All Rights Reserved. The Deseret Power Case and Implications for CO2 Regulation Under the Clean Air Act Presented by Lawrence E. Volmert Holland & Hart LLP December 16, 2008

2. Copyright Holland & Hart LLP 2008. All Rights Reserved. 2

3. 3 MASSACHUSETTS v. EPA  Massachusetts v. EPA, 549 U.S. 497 (2007) held that CO2 and other greenhouse gases (GHG) are “pollutants” and EPA has authority to regulate them. If endangerment, “shall” regulate vehicle emissions. Discretion regarding manner, timing and content of regulations. Did not preclude considerations of “policy concerns.”  Remanded to EPA to determine whether GHGs are reasonably anticipated to endanger public health or welfare.

4. Copyright Holland & Hart LLP 2008. All Rights Reserved. 4  Address two developments from Massachusetts v. EPA. Deseret Power case. Advanced Notice of Proposed Rulemaking. MASSACHUSETTS v. EPA

5. Copyright Holland & Hart LLP 2008. All Rights Reserved. 5  Sierra Club appealed PSD permit for the Bonanza Power Plant. Permit should have included Best Available Control Technology for CO2 emissions. BACT required for pollutants “subject to regulation” under the CAA. Massachusetts did not determine whether CO2 is “subject to regulation.” Deseret Power

6. Copyright Holland & Hart LLP 2008. All Rights Reserved. 6  Sierra Club argued: Section 821 of the Clean Air Act Amendments of 1990 requires monitoring and reporting of CO2 emissions. This is “regulation” of CO2 under the CAA and therefore CO2 is subject to BACT.  EPA argued that “subject to regulation” means imposition of emission controls. Deseret Power

7. Copyright Holland & Hart LLP 2008. All Rights Reserved. 7 Deseret Power  EAB rejected Sierra Club and EPA arguments and remanded to EPA. “Subject to regulation” does not clearly mean § 821 regulation o pen to interpretation. Rejected EPA arguments that its historical interpretation that “subject to regulation” means emission controls--precluded CO2 BACT.

8. Copyright Holland & Hart LLP 2008. All Rights Reserved. 8 Deseret Power  Status: EPA has authority to interpret “subject to regulation,” except on grounds EAB rejected. Could find that requirement to monitor is not a reasonable basis for imposing controls. Pollutants currently deemed subject to regulation have either had endangerment finding (NAAQS, NSPS), or Congressional determination of need for control (MACT).

9. Copyright Holland & Hart LLP 2008. All Rights Reserved. 9 Deseret Power  Short-term Impact on permitting. PSD-approved States—have discretion.  Georgia Court ruled must do BACT for CO2.  Utah and Montana boards did not require CO2 BACT. PSD-delegated States and tribal lands—likely to be appealed to EAB, and meet same fate until Deseret remand addressed.

10. Copyright Holland & Hart LLP 2008. All Rights Reserved. 10 Deseret Power  Impact may be temporary. If EPA makes endangerment findings in Massachusetts remand, CO2 will be regulated. If, in Deseret remand, EPA decides CO2 is subject to regulation, CO2 will be regulated. New Administration likely to act.

11. Copyright Holland & Hart LLP 2008. All Rights Reserved. 11 Deseret Power Should coal-fired power plants, other major sources of regulated pollutants, and/or 250 ton sources of CO2 be doing “voluntary” CO2 BACT, as a precaution?

12. Copyright Holland & Hart LLP 2008. All Rights Reserved. 12 Deseret Power  Practical Effects If CO2 ultimately “subject to regulation” What is impact on recently-issued permits or permits issued in the meantime? Bigger issue is possible massive expansion of PSD applicability.  250 tons/year of CO2?  Sierra Club says no one wants to regulate small sources—office buildings, apartment complexes, schools.  But does EPA have discretion to ignore plain language of CAA?  ANPR suggests maybe could argue absurd result or administrative necessity to avoid having small sources subject to PSD—but authority is not clear.

13. Copyright Holland & Hart LLP 2008. All Rights Reserved. 13 Deseret Power  Apart from PSD applicability threshold for CO2, for major sources of traditional PSD pollutants CO2 BACT might be required for significant emitters.

14. Copyright Holland & Hart LLP 2008. All Rights Reserved. 14 Deseret Power  If CO2 BACT applies—What is required? Capture and storage? Efficiency? Fuel switching?  BACT does not require “redefinition” of the proposed source. Debate over IGCC.

15. Copyright Holland & Hart LLP 2008. All Rights Reserved. 15 Deseret Power  Even if CO2 capture is feasible and cost effective, with reasonable CO2 energy penalties: To reduce emissions to atmosphere, need sequestration. Pending EPA rule on sequestration. Geological data. Commercial demonstration and monitoring. When will sequestration be doable?

16. Copyright Holland & Hart LLP 2008. All Rights Reserved. 16 Deseret Power  How to advise clients considering uncertainties?

17. Copyright Holland & Hart LLP 2008. All Rights Reserved. 17 ANPR  ANPR Discussion of endangerment, no proposal. discusses how GHGs might be regulated under various provisions of CAA.  NAAQS/SIP process.  NSPS.  MACT. Discusses impact of regulation on PSD/NSR

18. Copyright Holland & Hart LLP 2008. All Rights Reserved. 18 ANPR  Administration and several federal agencies say CAA is ill- suited to regulate GHG. Widespread impact on economy, “touch every household in the land.” Likely ineffectual at reducing concentrations of GHG.

19. Copyright Holland & Hart LLP 2008. All Rights Reserved. 19 ANPR  CAA provisions that might apply to GHG. If endangerment for vehicles, strong case for endangerment under stationary source provisions.

20. Copyright Holland & Hart LLP 2008. All Rights Reserved. 20 ANPR  NAAQS—GHG/climate change global in nature, difficult to fit in local/regional SIP process. Direct vs. indirect Cap and trade? Consequences of nonattainment? Avoid NAAQS lack of adverse impacts at current levels?

21. Copyright Holland & Hart LLP 2008. All Rights Reserved. 21 ANPR  NSR/PSD—likely would extend PSD to thousands of small sources not currently regulated EPA suggests might avoid PSD for small sources through principles of absurd result or administrative necessity—but authority is not clear Sierra Club suggests EPA should issue guidance saying that BACT will not apply to small sources.

22. Copyright Holland & Hart LLP 2008. All Rights Reserved. 22 ANPR  NSPS Selection of source categories—level of emissions, cost? Appropriate for global scope of climate change? Endangerment not prerequisite for already-listed source categories? Sierra Club argues must be CCS for coal plants. Current remand for utility steam generating units.

23. Copyright Holland & Hart LLP 2008. All Rights Reserved. 23 Doc #4405490