Scattered and Dissonant: The Clean Air Act, Greenhouse Gases, and Implications for the Oil and Gas Industry

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  I. INTRODUCTION  II. REGULATION OF GHG UNDER THE PREVENTION OF SIGNIFICANT      DETERIORATION PROGRAM      A. GHG as Air Pollutant and the Path of GHG Regulation under PSD         1. Massachusetts v. EPA         2. The Endangerment Finding, the Tailpipe Rule, the Timing            Rule, and the PSD Trigger         3. The Tailoring Rule: A voiding the Administrative Train            Wreck         4. Coalition of Responsible Citizens v. EPA      B. Implications of PSD GHG Regulation for the Oil and Gas         Industry         1. Source Categories Brought Into PSD Review Because of GHG            Emissions         2. Lowering of GHG Emissions Thresholds--Adding Sources         3. Administration Burdens            a. Permitting and Review            b. Permit Avoidance            c. Best Available Control Technology               i. General Guidance               ii. Specific Guidance            d. Potential Streamlining Approaches         4. GHG as NAAQS Criteria Pollutant?         5. Regulation of Other Pollutants under Varying Thresholds III. NEW SOURCE PERFORMANCE STANDARD REGULATION OF GHG      A. The Path of New Source Performance Standard (NSPS) Regulation         1. The NSPS Settlement Agreement         2. Power Plant GHG New Source Performance Standards      B. Implications of NSPS GHG Regulation for the Oil and Gas         Industry         1. Implications of New and Existing Power Plant NSPS and the            Promise of Cheap Natural Gas         2. Refinery New Source Performance Standards         3. Future Regulation of Midstream and Upstream Oil and Gas and            Operations under NSPS         4. Regulation of Existing Sources under NSPS?  IV. FEDERAL MARKET-BASED REGULATION OF GHG      A. The Path of [No] Cap and Trade in the US         1. Climate Change Legislation         2. The Mandatory Greenhouse Gas Reporting Rule      B. Implications for the Oil and Gas Industry         1. Administration of the Reporting Rule         2. Lessons of the Reporting Rule   V. STATE MARKET BASED REGULATION OF GHG      A. California Cap and Trade      B. Implications for the Oil and Gas Industry  VI. CONCLUSION 

I. INTRODUCTION

If the predictions of the International Energy Agency (IEA) come to pass, "the U.S. will become the world's top producer of oil by 2020, a net exporter of oil around 2030, and nearly self-sufficient in energy by 2035," all spurred by U.S. domestic off and gas production, with much of the gains attributable to horizontal drilling and hydraulic fracturing technologies. (1) The advancement of these technologies to extract natural gas from unconventional shale rock will see production growth from approximately 650 billion cubic meters in 2011 to 800 billion cubic meters in 2035 "putting the United States ahead of Russia as the largest gas producer in the world between 2015 and the end of the 2020s." (2)

In the midst of this overwhelming revolution in domestic oil and gas production, industry operators face an ever more complex web of regulations to control greenhouse gas (GHG) emissions (3) that have been promulgated or proposed under the auspices of the Clean Air Act (CAA). (4) Based on the holding in Massachusetts v. EPA (5) that greenhouse gases are an "air pollutant," (6) the Environmental Protection Agency (EPA) has morphed a statute to control GHGs emitted from motor vehicles into a tailored program to control emissions from new or modified stationary sources that emit or have the potential to emit over thresholds arbitrarily set by EPA. This GHG Prevention of Significant Deterioration (PSD) program now covers refineries and certain natural gas processing and treatment plants and is sure to be expanded to other industry segments.

In Coalition for Responsible Regulation, Inc. v. EPA, (7) industry and various states challenged EPA's Prevention of Significant Deterioration program in the D.C. Circuit Court of Appeals to no avail. (8) Notwithstanding that the special solicitude of the states was in part the basis for standing in Massachusetts, (9) no such solicitude was provided the state petitioners in Coalition. …