Earlier today, the U.S. Court of Appeals for the D.C. Circuit vacated yet another EPA rule related to air quality.  This time, the court took issue with EPA’s decision to temporarily exempt biomass facilities from its new greenhouse gas permitting requirements.  Without the exemption, obtaining an air quality permit for a new biomass facility, or any major modifications of an existing facility, will be much more difficult.

To be more precise, the exemption applied not only to biomass facilities but also to any facility with “biogenic” carbon dioxide (CO2) emissions – i.e., CO2 emitted from the use of wood or other biological materials.  As a result, the rule covered landfills and ethanol producers, in addition to facilities that combust biomass to produce steam or electricity.  The exemption allowed all such facilities to avoid counting “biogenic” CO2 in complying with the Prevention of Significant Deterioration (PSD) and Title V Operating Permit provisions of the Clean Air Act, which EPA began applying to greenhouse gases in 2011.

In response to its “Greenhouse Gas Tailoring Rule,” issued to help manage the implementation of the new permitting programs, EPA received numerous requests for a biogenic exemption based on the idea that those emissions are “carbon neutral” – that is, they only release what was recently absorbed from the atmosphere into the biological material.  As a result, the release of “biogenic” CO2 does not present the same policy concerns associated with the use of fossil fuels, which releases carbon that would otherwise have remained underground for millennia.

To give itself time to decide how to address the unique policy considerations presented by biogenic CO2, EPA issued a temporary “Deferral Rule” to maintain the status quo by exempting biogenic CO2 emitters from the newly imposed greenhouse gas permitting programs.  The deferral was scheduled to last three years, from July 1, 2011 until July 1, 2014, while EPA performed an in-depth study of the “carbon neutral” nature of biogenic emissions.  At the end of the study, EPA promised to determine an appropriate means for regulating those emissions, to the extent necessary at all.

However, the D.C. Circuit granted the legal challenge levied by the Center for Biological Diversity and vacated the deferral, cutting short EPA’s study period by a year, and before EPA could issue a permanent exemption.  Each of the three judges wrote separate opinions to express their differing views, but two of the judges agreed to vacate the rule because it was inconsistent with the statute and because EPA failed to support its reliance on several administrative law doctrines.  Specifically, the court officially held that EPA could not justify its rule on the basis of the “administrative necessity,” “one-step-at-a-time,” and “absurd results” doctrines.  EPA used these same doctrines to support its Tailoring Rule, which the D.C. Circuit upheld a few months ago, but the court decided that the Deferral Rule would stretch these doctrines too far.

The court is currently withholding the effectiveness of its decision to allow for the possibility of an appeal, such as a rehearing before the entire D.C. Circuit or an appeal to the U.S. Supreme Court.  If the court’s decision stands, EPA could still issue a permanent exemption to replace the temporary one it lost.  But that effort could take several years, particularly given EPA’s already full plate.  In the meantime, biogenic CO2 facilities will have to begin counting all of their CO2 emissions earlier than expected in complying with PSD and Title V, which could present a significant challenge for some projects.

The court’s decision is available here: Biomass Deferral Rule Vacatur