New Source Review 2024

January 18, 2024
Carol F. McCabe
MGKF Special Alert - 2024 Federal Forecast

The Clean Air Act New Source Review program continues to be one of the most complex environmental permitting programs, for permittees and agencies alike.   New Source Review, comprised of the Non-Attainment New Source Review (NNSR) and Prevention of Significant (PSD) programs, has been subject to a long history of administration-driven changes in interpretation that largely center around when a modification to a major source may cause a significant net emission increase that triggers heightened permitting requirements, such as Lowest Achievable Emissions Rate and emission offsets under NNSR and Best Available Control Technology and air quality impact assessments under PSD.  After several interpretive and rulemaking actions undertaken by the Trump Administration to streamline and simplify New Source Review rules, the Biden Administration has sought to reverse or revise those actions in response to concerns from some states and environmental advocates that EPA’s Trump-era moves would weaken New Source Review protections.  Our forecast articles in 2022 and 2023 detail the Biden Administration’s plans for New Source Review actions, and 2024 will likely see EPA continuing these efforts.

First, EPA plans to undertake revisions to the Project Emission Accounting Rule this year.  This rule was finalized under the Trump Administration in November 2020, allowing permittees to account for emission increases and decreases in the first step of the two-step analysis for determining whether a project causes a significant net emission increase triggering New Source Review requirements.  The rule marked a change in approach for EPA, which historically allowed consideration of only emission increases in the “Step 1” determination of whether a significant emission increase would result from a modification and allowed consideration of emission decreases only in the “Step 2” net emission increase analysis, which considers net changes in emissions during a contemporaneous period.  Importantly, under EPA’s program rules, if a project increase is determined not to be significant in Step 1, then the permittee need not proceed to the Step 2 netting analysis and New Source Review does not apply.  While generally favored by industry, the Project Emission Accounting Rule was strongly criticized by certain states and was the subject of a Petition for Reconsideration submitted by a coalition of environmental advocacy groups in January 2021. The Petitioners argued that the Project Emission Accounting Rule failed to ensure that decreases considered in Step 1 are actually related to the proposed project and would tend to allow sources to avoid New Source Review.  While EPA denied the Petition for Reconsideration on procedural grounds, EPA has indicated that it would 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.  Based on EPA’s most recent Regulatory Agenda, which identified December 2023 as the date for a Notice of Proposed Rulemaking, a proposal should be forthcoming in the near term.  Although EPA has not provided detail on its planned proposal, it seems likely that the scope of the proposed rule will address concerns expressed in the Petition, along with related concepts affecting the manner in which emission increases are calculated in the New Source Review context.

Second, the Reconsideration of the Fugitive Emissions Rule remains pending.  With a comment period that closed in February 2023, EPA has yet to act.   The proposed Fugitive Emissions Rule would clarify that fugitive emissions increases will be counted toward significance thresholds in major modification determinations for all source categories, whereas such emissions are counted toward initial major source threshold determinations for only specific source categories listed in the regulations (such as petroleum refineries, portland cement plants, and iron and steel mills).  The Fugitive Emissions Rule would also remove a longstanding exemption from New Source Review for circumstances in which New Source Review would be triggered “only if fugitive emissions, to the extent quantifiable, are considered in calculating the potential to emit…” See 52.21(i)(1)(vii).  The Fugitive Emissions Rule proposal represents EPA’s latest attempt to end a long and tangled history on this topic by undoing a 2008 rule that had been promulgated under the Bush Administration then almost immediately stayed by the Obama Administration.  The 2008 rule was the exact opposite of the current proposal and would have limited consideration of fugitive emissions to only specifically enumerated source categories.  In reversing course and thereby broadening the scope of New Source Review applicability, the latest proposal garnered significant adverse comment from some states and industries that foresee the rule adding significant complication and burden to New Source Review permitting, without any real environmental benefit.  Perhaps in light of these comments, EPA appears to have delayed finalization of the rule pending further review.  EPA’s latest Regulatory Agenda has changed the anticipated date for the final rule to “to be determined.”

Third, EPA’s recently proposed rule Clarifying the Scope of “Applicable Requirements” Under State Operating Permit Programs and the Federal Operating Permit Program, while not directly impacting New Source Review requirements and applicability, seeks to clarify the extent to which such requirements fall within the definition of “applicable requirement” within the Title V operating permit program.  Importantly, the proposed rule would clarify that EPA will not revisit the substance of New Source Review permitting decisions in the context of its Title V review authority or in response to Petitions to Object filed by third parties under the Clean Air Act Title V process.  Based on EPA’s Regulatory Agenda, the rule is expected to be finalized in June 2024.

Other actions forthcoming in 2024 may include new EPA guidance on minor source permitting programs, and the definition of potential to emit.  Also pending is EPA’s proposal to tighten the annual PM2.5 National Ambient Air Quality Standard, and EPA’s intention to commence a review of the NAAQS for ozone.