EPA Addresses Several NSR Issues

March 18, 2009
MGKF News Flash

In the waning days of the Bush administration, EPA published several determinations relevant to federal New Source Review ("NSR") requirements.

First, EPA published guidance regarding emission aggregation requirements for multiple projects at a single facility. Under EPA's regulations, the construction of a new source or modification of existing sources would result in NSR applicability if the net emission increase associated with the modification or new source construction exceeded regulatory significance levels for specific pollutants. EPA has previously advised that a facility must aggregate emissions associated with all source modifications and new source construction within the context of any single "project" conducted at the facility. In other words, if multiple sources are modified or constructed as part of a single "project," then net emission increases from all such modifications or new sources must be aggregated for comparison to regulatory significance levels to determine whether NSR applies.

Not surprisingly, this interpretation has led to significant debate about the proper method for determining the scope of a "project" relative to the requirement to aggregate emission increases. On January 12, 2009, EPA published its determination on that question, generally providing that multiple source modifications or new source construction are presumed not to constitute a single project if such activities are separated in time by three or more years, or are not otherwise interdependent.

Several environmental groups promptly filed petitions for reconsideration of EPA's regulation, contending that its interpretation would allow many projects to avoid NSR review. The Obama Administration has determined to postpone effectiveness of the new rule pending further review.

Also at the close of the Bush administration, EPA published its determination to abandon its rulemaking to establish hourly emission changes as the basis for evaluating NSR applicability. In Environmental Defense v. Duke Energy Corp., 549 U.S. 561 (2007), the Supreme Court rebuffed an argument by EPA, and concluded that the evaluation of NSR applicability must be based upon a comparison of annual emission rates, prior and subsequent to a source modification. EPA then initiated a rulemaking effort to revise their regulations to provide that NSR applicability would be evaluated by comparing changes in hourly emission rates, consistent with the modification analysis performed under the New Source Performance Standards. However, on January 15, 2009, EPA published its decision to withdraw that rulemaking.

Finally, EPA also finalized a rulemaking to clarify that fugitive emissions need not be considered in evaluating NSR applicability, except for specific source categories enumerated in the NSR regulations. EPA had previously noted that an unintended consequence of its NSR reform regulations, promulgated in December 2002, was revised regulatory language which could be interpreted to require consideration of fugitive emission changes in virtually all cases. EPA's recent final rule avoids that outcome, at least for evaluation of NSR applicability under federal rules. However, many states, including Pennsylvania, expressly require consideration of changes in fugitive emission rates for evaluating applicability of state-based NSR requirements for nonattainment areas.