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EPA Clarifies Emissions Accounting Procedures for Determining NSR Permitting Requirements

August 1, 2018

By Lou Corio
Senior Air Quality Scientist, Environmental Division

This article was originally published in Currents, POWER’s quarterly Environmental newsletter.

Historically, permitting under the Clean Air Act (CAA) New Source Review (NSR) program—either the Prevention of Significant Deterioration (PSD) or the Nonattainment New Source Review (NNSR) rules has been a challenge for most permit applicants. EPA recently issued clarifying guidance for conducting NSR program applicability assessments that could embolden more permit applicants to seek to justify their projects as minor modifications, thereby avoiding the significant, potentially project-delaying requirements for obtaining a PSD or NNSR permit.

Historical Background

The NSR permitting process was formalized through regulations promulgated by EPA in August 1980, along with subsequent rule revisions and interpretive policy and guidance from EPA. Historically, controversy has followed the term “significant emissions increase,” especially regarding the determination of future, post-construction emissions. A project showing a significant emissions increase is categorized as a “major modification,” triggering major NSR requirements.

In July 1996, EPA proposed revisions to the NSR rules, including the procedure for determining whether a proposed project at a major source results in a significant emissions increase. In December 2002, EPA finalized these revisions as part of a suite of NSR rule revisions, known as the “NSR Improvement Rules.” Under the NSR Improvement Rules, a source owner or operator (“source”) could evaluate an emission increase by subtracting actual (i.e., recent past) annual emissions from projected actual (i.e., future) annual emissions, although the approach for determining the latter seemed open to interpretation.

The NSR Improvement Rules also further defined the major modification determination procedure as a two-step process, requiring a showing of 1) a significant emission increase of a regulated NSR pollutant, and 2) a significant net emission increase of that pollutant for a proposed project that is considered a physical change or change in the method of operation of a major source. EPA clarified that any other emissions increases and decreases at the source that are contemporaneous with the proposed project be included in the “net emissions increase” determination under Step 2. Contemporaneous is defined as being in the period between the date five years before construction commences and the date operation commences.

In September 2006, EPA proposed to allow a source to “project net,” i.e., to allow emissions decreases, in addition to emissions increases, associated with a project to be included under Step 1 of a major modification determination. However, EPA never took final action on that proposal.

Recent EPA Guidance

In 2017, EPA conducted a review of the agency’s implementation of preconstruction permitting requirements under the CAA NSR provisions in accordance with “presidential priorities for streamlining regulatory permitting requirements.” Because of this review, EPA identified various elements of the NSR regulations and associated EPA policies, including those for major modification determinations, that have created uncertainty and confusion for both permit applicants and permitting agencies. To address these findings, EPA issued memoranda on December 7, 2017, and March 13, 2018, clarifying their current understanding of emissions accounting under the NSR regulations for proposed projects at major sources.

A better process. EPA’s new clarifying guidance for NSR program applicability may prove to be a significant time and cost savings for permit applicants.

In noting ongoing disputes in the U.S. courts in recent NSR enforcement cases, and the resulting uncertainty regarding approaches to assessing NSR applicability, EPA issued the December 7, 2017, memorandum to provide guidance for sources that have used or intend to use projected actual emissions to determine if resulting emissions increases are “significant.” EPA clarified that when a source performs such a pre-project NSR applicability analysis in accordance with the calculation procedures in the regulations, and follows the applicable recordkeeping and notification requirements, then the source has met the pre-project obligations of the regulations, unless there is a clear error (e.g., the source applies the wrong significance threshold). As stated by the agency, “The EPA does not intend to substitute its judgement for that of the owner or operator by second guessing the owner or operator’s emission projections.”

In its March 13, 2017, memorandum, EPA provided clarification regarding the accounting of emissions decreases at a source as part of the major modification assessment process in determining if a project will result in a significant emissions increase. EPA’s interpretation of NSR regulations allow a source to “project net,” provided the increase(s) and decrease(s) are part of a single project. For a project involving both existing and new units, this emissions accounting is to be done on a unit type-by-unit type basis.

Potential Implications

The recent EPA guidance is intended to reduce confusion regarding the proper approach for conducting NSR applicability assessments, while appearing to provide more flexibility to permit applicants in the accounting of emissions changes associated with a proposed project. For example, in determining if a decrease can be included in Step 1, EPA stated that they will not preclude a source from reasonably defining its proposed project broadly, to reflect multiple activities. Also, EPA said that they do not interpret the existing regulations as requiring that a decrease be creditable or enforceable as a practical matter to be considered in Step 1.

Ultimately, the recent guidance should reduce permit review/approval timeframes for modifications at major sources, assuming the local regulatory agencies and/or affected public don’t challenge the interpretation and use of this guidance. Regarding the potential for challenges, EPA reminds applicants that the guidance “does not change or substitute for any law, regulation or other legally binding requirement and is not legally enforceable.” Also, EPA still intends to review each permitting project on a case-by-case basis.

About the Author:

Lou has been providing air quality consulting services to industry and government and conducting special atmospheric studies since 1983. He has extensive experience with important air quality topics, including New Source Review (both Prevention of Significant Deterioration and nonattainment areas) and Title V permitting, atmospheric dispersion model development, evaluation, and application; Risk Management Program and Plan development; utility and industry facility environmental audits (emphasis on air quality); and risk assessment. He has directed or conducted technical research projects on complex air quality issues such as condensable particulate matter (PM) measurement methods. Lou has developed guidance documents for trade organizations on changing regulations, such as Title V operating permits and Risk Management Plans. He has provided public hearing support and testimony in Maryland Public Service Commission (PSC) proceedings on power plant licensing. Do you have questions for Lou? Send him an email at lou.corio@powereng.com.