New Source Review: What to Expect in 2022

January 14, 2022
Carol F. McCabe, Esq.
MGKF Special Alert - Federal Forecast 2022

EPA’s regulatory actions to implement the Clean Air Act’s New Source Review (NSR) permitting program over the last three decades have been high on the radar for major sources of air emissions, and 2022 will be no different.  During the Trump administration, EPA undertook a series of regulatory actions intended to clarify and streamline NSR for permittees.  Whereas many of EPA’s actions addressed longstanding ambiguities in the regulations or policy interpretations arising from prior administrations, several of the actions were met with criticism by state regulatory agencies and environmental advocacy groups who argued that the reforms weakened the NSR program.  Our 2021 forecast outlined EPA’s actions during the Trump administration and predicted that the Biden administration may consider changes to some of these actions. While 2021 turned out to be relatively quiet in the world of NSR, perhaps   given the Biden Administration’s focus on other priorities, it appears possible that at least one key NSR action could be expected to move forward in 2022 and beyond. 

The Biden administration appears to have the Project Emission Accounting Rule in its sights for review or revision.  The rule was finalized in November 2020, allowing permittees to account for increases and decreases in emissions (the “sum of the difference”) in “Step 1” of the two-step analysis for determining whether a project causes a significant net emission increase triggering NSR requirements.  Step 1 of the NSR analysis is important because if a project increase is determined to be not significant (i.e. below certain pollutant-specific thresholds) in Step 1, then the permittee need not proceed to the Step 2 netting analysis to consider all increases and decreases during the contemporaneous period in order to determine whether a significant net emission increase occurred, and NSR is not triggered.   

The Project Emission Accounting Rule was strongly criticized by certain states and was the subject of a Petition for Reconsideration submitted by the Environmental Defense Fund, the Natural Resources Defense Council, the Environmental Integrity Project, the Sierra Club, and the Adirondack Council in January 2021. The Petitioners objected to the Project Emission Accounting Rule on the following bases: 1) the rule failed to ensure that decreases considered in Step 1 are related to the proposed project; 2) the rule would allow a source to avoid NSR by using non-contemporaneous decreases in Step 1; and 3) the rule failed to ensure that emission decreases will occur and be maintained.  

In a letter to Petitioners dated October 12, 2021, EPA denied the Petition for Reconsideration, stating that the Petition did not meet the Clean Air Act criteria for mandatory reconsideration under Section 307(d)(7)(B) that it was impracticable to raise the objection during the comment period, or that the grounds for such objection arose after the comment period but within the time specified for judicial review (i.e. within 60 days after publication of the final rule).  EPA’s letter outlined the various comments and EPA responses to comments that addressed Petitioners’ concerns.  Notably, despite EPA’s denial of Reconsideration, which evidences a strict adherence to the statutory criteria, EPA indicated that it will undertake a rulemaking to review the Project Emission Accounting Rule consistent with President Biden’s Executive Order 13990 Protecting Public Health and the Environment by Restoring Science to Tackle the Climate Crisis, stating:  “The EPA agrees, however, that the petition for reconsideration identified potential concerns that warrant further consideration by the EPA.  Therefore the agency plans to initiate, at its own discretion, a rulemaking process to consider revisions to the EPA’s New Source Review regulations that would address the issues raised in the submitted petition and comments on the Project Emission Accounting rule.”  While the timing of this forthcoming rulemaking has yet to be established, it seems likely that the scope of EPA’s effort will address concerns expressed in the Petition, along with related concepts affecting the manner in which emission increases are calculated in the NSR context.