Local States to Implement Federal NSR Reform

January 16, 2006
Client Alert Newsletter Forecast 2006

Approximately three years ago, the U.S. Environmental Protection Agency ("EPA") promulgated significant revisions to the federal New Source Review ("NSR") permitting regulations. These regulations have since been the subject of several legal challenges. Although the courts have invalidated isolated aspects of these NSR reform regulations, the basic program has withstood judicial scrutiny.

In most jurisdictions, including Pennsylvania, New Jersey and Delaware, certain provisions of the federal NSR reform rule became effective shortly after its final promulgation. NSR consists of two distinct programs: the prevention of significant deterioration ("PSD") provisions apply to the emission of a criteria pollutant in areas designated as in "attainment" with national standards for that pollutant, while the nonattainment-NSR provisions apply to the emission of criteria pollutants, typically including volatile organic compounds ("VOCs") and oxides of nitrogen ("NOx"), in "nonattainment" areas. The PSD provisions of EPA's NSR reform rules have been in effect in the tri-state region and other jurisdictions for approximately three years. By contrast, most states, including Pennsylvania, New Jersey and Delaware, had promulgated, at least in part, state-specific nonattainment-NSR regulations. As part of its NSR reform package, EPA required such states, by 2006, to implement EPA's revised nonattainment-NSR program or demonstrate that a state-specific program is "equivalent" to the federal program.

The Pennsylvania Department of Environmental Protection ("PADEP") is moving forward with a rulemaking program that would substantially modify its existing nonattainment-NSR program in Pennsylvania. Significantly, PADEP would forego its historic test for evaluating emission increases resulting from modifications, which compared the potential emission rate of the source pre- and post-modification, in favor of EPA's method that compares the actual emission rate pre-modification with the projected future actual emission rate post-modification. However, PADEP has not proposed to adopt other aspects of the federal NSR reform package that are more favorable to industrial sources.

Delaware has expressed its intention to utilize one element of the federal NSR reform package to comprise its entire nonattainment-NSR program. In particular, the Delaware Department of Natural Resources and Environmental Control ("DNREC") proposes to establish a permitting program that would impose a facility-wide emission limit ("FEL"), termed a plantwide applicability limit by EPA, upon all major sources. Nonattainment-NSR determinations for future modifications would be based on whether the facility adheres to the existing FEL. DNREC continues to consider different methodologies for establishing the baseline emission rate that would be used to calculate the FEL. This methodology will be critical for all major sources, and in some cases could result in a required reduction in the allowable emission limits.

The New Jersey Department of Environmental Protection ("NJDEP") has yet to move forward with any rulemaking to address the NSR reform requirements in New Jersey. NJDEP may elect to contend, at least in the short term, that its existing nonattainment-NSR program should satisfy federal standards. In the alternative, the federal NSR reform package may become applicable in New Jersey for nonattainment-NSR as well as PSD