Originally published as a Schiff Hardin Environmental Update newsletter

On July 6, 2011, the United States Environmental Protection Agency (“USEPA”) finalized the Cross-State Air Pollution Rule (“CSAPR”) that was proposed in July 2010 as the “Transport Rule.” To reduce the downwind impact of out-of-state pollution, the final rule requires 27 states to reduce power plant emissions that contribute to cross-border air pollution of both ozone and fine particles (PM2.5). The CSAPR replaces the 2005 Clean Air Interstate Rule (CAIR), which the U.S. Court of Appeals for the D.C. Circuit ordered USEPA to revise in 2008. North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008).

The CSAPR requires coal-fired power plants to meet state-by-state emission caps of SO2 and NOx. Emission reductions are required by January 1, 2012, for SO2 and annual NOx emissions, and by May 1, 2012, for ozone season NOx emissions. The CSAPR splits the states that must reduce SO2 emissions into two groups. Both groups must meet initial reductions by January 1, 2012. Group 1 states, however, will be subject to more stringent SO2 reductions starting in 2014. According to USEPA, by 2014, the CSAPR together with other state and USEPA actions will reduce emissions of SO2 in the CSAPR region by 73% from 2005 levels and emissions of NOx in the CSAPR region by 54% from 2005 levels.

In a controversial move, USEPA is adopting federal implementation plans (FIPs) to enforce the CSAPR. Individual states can replace the FIPs by promulgating the CSAPR through State Implementation Plans (SIPs) beginning in 2013.

USEPA made several significant changes to the CSAPR from the proposed version of the Rule published in July 2010. USEPA updated the modeling tools it used to conclude which states significantly contribute to the nonattainment of National Ambient Air Quality Standards (NAAQS) in other states. Based on the revised modeling results, USEPA added Texas to the list of states required to reduce annual emissions of SO2 and NOx, but removed Connecticut, Delaware, the District of Columbia, Florida, Louisiana and Massachusetts from that list. USEPA also added Iowa, Missouri and Wisconsin to the ozone season program, but removed Connecticut, Delaware and the District of Columbia from that program. As a further result of the revised modeling data, USEPA revised the emissions budgets, assurance levels and variability limits that determine each state’s required reduction under the CSAPR.

USEPA also eliminated the opt-in provision it proposed in the Transport Rule. The opt-in provision would have allowed non-covered units to participate in the emissions trading programs established as part of the rule; the final rule does not authorize such participation for non-covered units.

Along with the finalized CSAPR, USEPA also issued a supplemental proposal that would require six states — Iowa, Kansas, Michigan, Missouri, Oklahoma and Wisconsin — to reduce NOx. during the summer ozone season. Because the CSAPR requires each of these states, except Oklahoma, to reduce emissions of PM2.5, if the supplemental proposal is finalized, a total of 28 states will be subject to at least some reductions under the CSAPR. USEPA intends to finalize this supplemental proposal by late fall of this year.

Because the pollution control equipment often used to comply with the CSAPR is both expensive and takes time to construct, lobbying efforts to delay the Rule are already underway. On July 12, 2011, the House Energy and Commerce Committee passed the Transparency in Regulatory Analysis of Impacts on the Nation Act of 2011 (the “TRAIN Act”) (H.R. 2401) that included an amendment (The “Whitfield-Ross Amendment”) to delay the CSAPR. The TRAIN Act requires an interagency panel to provide a report to Congress regarding the economic cost of various air emissions rules by August 2012. The Whitfield-Ross Amendment would delay action on the CSAPR until six months after the interagency panel’s report is published, meaning at least January 2013, and would further place the same delay on the maximum achievable control technology (MACT) rule governing coal-fired power plants that was issued earlier this year. The TRAIN Act, along with the Whitfield-Ross Amendment, is now waiting a full vote in the House.

We will keep you updated on the efforts to delay the implementation of CSAPR and the MACT rule. In the meantime, please call if you have questions about how the CSAPR will affect your business.