U.S. EPA has sent a draft rule to the White House that could limit regulations on greenhouse gas emissions to cover only very large industrial sources.

The agency yesterday submitted a rule to the White House Office of Management and Budget that experts say will likely limit strict permitting requirements to industrial sources of more than 25,000 tons a year of carbon dioxide equivalent.

The rule is aimed at shielding smaller sources of emissions from being subject to any new regulatory regime. The Clean Air Act now requires new and modified industrial sources to install "best available control technologies" when they emit 250 tons or more of a pollutant per year.

Although the submission to OMB does not include details of the proposed rule, experts say the threshold is likely to be set at 25,000 tons because that's the stated limit in both EPA's proposed greenhouse gas reporting rule and the climate legislation passed by the House in June.

The draft "Prevention of Significant Deterioration/Title V Greenhouse Gas Tailoring Rule" is seen as a critical regulation that would work in conjunction with several other climate-change rules expected from EPA.

EPA and the Transportation Department last week sent draft rules to the White House for review that would boost automobile and light truck efficiency standards for model years 2012 to 2016, and impose first-ever federal tailpipe standards for greenhouse gases. Those rules hinge on the finalization of EPA's proposed "endangerment finding," which would establish greenhouse gases as pollutants under the Clean Air Act.

Once it begins to regulate greenhouse gases from cars and trucks, EPA will be legally required to regulate all new or modified facilities that emit more than 250 tons per year of carbon dioxide. By moving that threshold to 25,000 tons per year, the permitting rule would cover roughly 13,000 facilities from all sectors of the economy that account for 85 to 90 percent of U.S. emissions, the agency said.

"What they're trying to do is protect the innocent bystanders from being impacted by the finalization of the car rule," said Roger Martella, who was EPA general counsel under President George W. Bush.

David Bookbinder, chief climate counsel at the Sierra Club, said the rule would also deflect claims from Republican lawmakers and industry groups that the Obama administration is seeking to regulate small emission sources such as doughnut shops, schools and nursing homes.

"Putting this rule in place deflates a lot of the political rhetoric about regulating CO2," he said.

The Obama EPA is moving forward on greenhouse gas regulations despite the administration's stated preference for legislation over agency regulations. Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) -- the lead authors of the Senate climate bill -- announced yesterday that they would delay plans to introduce climate legislation until later this month.

Bookbinder predicted EPA's proposed endangerment finding will be finalized soon, followed by the threshold rule and finally the tailpipe standards, which are expected to be finalized by March 2010. "You can't go final with the car rule until you have a final endangerment finding and you don't want to go final with the car rule until you have [the threshold rule] in place," he said.

Bookbinder said environmentalists are comfortable with the 25,000 ton threshold, but Martella and others have expressed concerns that EPA may face questions about its legal authority to raise the threshold from the 250 tons stipulated in the Clean Air Act.

"I think they're going to come up with the best possible arguments they can," Martella said. But he added that it's inevitable that the rule will be challenged at some point, despite vows by mainstream environmental groups to support the threshold.

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500