New Source Review: What to Expect in 2023
The coming year is likely to be active in the realm of New Source Review, with the Biden Administration moving forward with several actions that will reverse prior administrations and serve to tighten New Source Review requirements. First, in December 2022, EPA rescinded the policy memo by former EPA Administrator Scott Pruitt titled “New Source Review Preconstruction Permitting Requirements: Enforceability and Use of the Actual-to-Projected Actual Applicability Test in Determining Major Modification Applicability.” It was no surprise that EPA rescinded this Trump-era memo, which had as its centerpiece a pronouncement that EPA would not “second-guess” projected actual emissions estimates by permittees, particularly where actual emissions remain below significance thresholds after the change in question. Perhaps an indicator of future enforcement priorities, EPA’s recission of the Pruitt memo serves to remind permittees to proceed carefully through NSR applicability determinations because they may be examined in detail after the fact, including calculations of projected actual emissions and the role of the demand growth exclusion in that context.
Second, EPA will move forward with its Reconsideration of Fugitive Emissions Rule (the Reconsideration Rule), for which the comment period closes on February 14, 2023. The proposed Reconsideration Rule would repeal a Bush-era rule that sought to clarify that increases in fugitive emissions need not be counted toward New Source Review significance thresholds in the major modification context for sources that are not within source categories that are specifically listed within the regulations. Citing the long and twisted regulatory history of EPA’s treatment of fugitive emissions, which includes a “longstanding” interpretive ruling and an “inadvertent” failure to correct the regulatory text over the course of several decades, the Reconsideration Rule would reverse the 2008 rule (which, to add to the confusion, has remained on the books but has been stayed since 2009). In short, under the proposed Reconsideration Rule, fugitive emissions will only be counted toward major source threshold determinations for specific source categories listed in the regulations (such as petroleum refineries, portland cement plants and iron and steel mills), whereas fugitive emission increases will be counted toward significance thresholds in major modification determinations for all source categories. In addition, the proposed Reconsideration Rule would remove an 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). While the proposed Reconsideration Rule will promote long-needed clarity within the regulatory language, it is likely to make New Source Review Requirements more difficult to navigate for certain major sources in non-listed source categories. In particular, questions of quantification and modeling of fugitive emissions and determinations of Best Available Control Technology are sure to arise and create additional permitting burden and uncertainty for permittees.
Third, on January 6, 2023, EPA announced its decision to revisit the National Ambient Air Quality Standards (NAAQS) for PM2.5. EPA announced its proposed decision to revise the primary (health-based) annual PM2.5 standard from its current level of 12.0 µg/m3 to within the range of 9.0 to 10.0 µg/m3. EPA also proposed not to change the current secondary (welfare-based) annual PM2.5 standard, primary and secondary 24-hour PM2.5 standards, and primary and secondary PM10 standards. As part of the proposal, EPA would require a change to the PM2.5 air monitoring network design criteria, to add an environmental justice component to ensure that monitors are sited in communities that are subject to increased risk of PM2.5 related health effects. While the NAAQS revision will not immediately affect permittees, EPA monitoring shows that 62 counties, including several located in Pennsylvania, would not meet a tightened NAAQS PM2.5 standard of 9.0 µg/m3. Once these counties are designated nonattainment, major sources of PM2.5 or its precursors will face new requirements for nonattainment New Source Review. EPA will accept comment on the proposal for 60 days after its publication in the Federal Register.
Fourth, the Biden Administration has set its sights on the Trump-era Project Emission Accounting Rule, which 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 New Source Review requirements. Importantly, 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 to consider all increases and decreases during the contemporaneous period against the New Source Review significance threshold for major modifications. 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: 1) failed to ensure that decreases considered in Step 1 are related to the proposed project; 2) would allow a source to avoid New Source Review by using non-contemporaneous decreases in Step 1; and 3) failed to ensure that claimed emission decreases would actually occur and be maintained. In a letter to Petitioners dated October 12, 2021, EPA denied the Petition for Reconsideration on the basis that the Petition did not meet the Clean Air Act criteria for mandatory reconsideration under Section 307(d)(7)(B). However, EPA 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 Fall 2022 Regulatory Agenda, the rulemaking will be forthcoming in the near term. Although EPA has not provided detail on its planned proposal, 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.
Finally, EPA has announced an initiative to clarify minor New Source Review program requirements for state and local air permitting agencies. This effort would seek to ensure accountability in meeting the NAAQS and transparency in ensuring meaningful engagement by the public in minor source permitting actions. EPA’s focus will include synthetic minor sources, non-major modifications at major sources, “true minor” sources, and even general permits. EPA action on this initiative is expected in the summer of 2023.