Special Topics in Environmental Management

EPA Working to Loosen Up NSR Process

EPA Administrator Scott Pruitt has been working to loosen up the Agency’s New Source Review (NSR) process. In the latest action, Pruitt has issued a memo that gives more weight to projected emissions decreases in what is known as Step 1 of the NSR. This policy change will potentially liberate some projects from moving on to Step 2 of the NSR, a more complex process that makes it more likely that the project will need a Clean Air Act (CAA) permit.

PSD and NNSR permits

The NSR is a preconstruction review requirement (applicable to both new projects and major modifications to existing sources) to determine if construction will result in significant increases in emissions of regulated air pollutants. Should the review determine that such increases will occur, the project becomes subject to permitting under either the EPA’s Prevention of Significant Deterioration (PSD) program for areas in attainment with the National Ambient Air Quality Standards (NAAQS) or the Nonattainment NSR (NNSR) program, which applies to whichever emitted NAAQS pollutant(s) is causing nonattainment in an area.

Obtaining PSD and NNSR permits can be a prolonged and costly undertaking that industry has long argued has delayed economic expansion and even prevented installation of pollution control measures.

Accordingly, in line with orders from the White House to streamline permitting, Pruitt has zeroed in on the NSR process.

December 2017 memo

The new memo follows Pruitt’s release of a memo in December 2017, which directed EPA regional directors to consider data on a project’s projected actual emissions developed by the project’s owner or operator as relevant information when determining whether permitting is required.

“The EPA does not intend to substitute its judgment for that of the owner or operator by second guessing the owner or operator’s emissions projections,” wrote Pruitt.

Furthermore, the memo indicated that the Agency “does not presently” intend to take enforcement action against owners or operators if their post-project actual emissions exceed their projected emissions unless a significant emissions increase or a significant net or plantwide emissions increase did, in fact, occur.

New role for emissions decreases

According to Pruitt, the policy included in the new memo addresses uncertainty among both permitting authorities and stakeholders about whether emissions decreases from a proposed project at an existing major stationary source may be taken into account under Step 1 of the NSR.

Step 1 requires a determination of whether a proposed project by itself is projected to result in a significant emissions increase. The memo states that the EPA has, at times, indicated that the NSR regulations preclude consideration of emissions decreases at Step 1, and as a result, the practical effect has been the delay or prevention of projects that would not have resulted in significant emissions increases.

The memo states that the Agency now interprets the NSR regulations (40 CFR Sections 52.21(a)(2)(c) through (iv)(f)) as providing that any emissions decreases that may result from a given proposed project are to be considered when calculating at Step 1 whether the proposed project will result in a significant emissions increase. The EPA states:

“Central to the CAA’s definition of modification is that there must be a causal link between the physical or operational change at issue—i.e., the project—and any change in emissions that may ensue. In other words, it is necessary to account for the full and direct effect of the proposed change. Accordingly, at the very outset of the process for determining whether NSR may be triggered, the EPA should give attention to not only whether emissions may increase from those units that are part of the project but also whether emissions may at the same time decrease at other units that are also part of the project.”

Summing the difference

To support its revised policy, the memo reinterprets language in the NSR regulations. For example, in determining a project’s projected actual emissions or potential to emit (PTE) compared to emissions before the project, the regulations indicate that the sum of the difference should be calculated. EPA’s past position has been that summing must entail increases in emissions from new units because these units have baseline emissions of zero, and therefore, no new unit can be credited with emissions decreases or negative numbers. The memo states that this interpretation “overlooks” the regulatory definition that a new unit is one that has existed for less than 2 years since it first operated. In other words, if the owner or operator projects that pollution controls will be added to the new units during the 2-year period, which will reduce emissions, the PTE could be lowered, producing negative emissions that can be included in Step 1.