EPA Plan to Reduce Interstate NOx Transport

On April 6, 2022, the EPA’s proposed rule to tackle the obligations of upwind states to ensure they do not interfere with ozone attainment for downwind states was published in the Federal Register. This Federal Implementation Plan (FIP) is proposed under the “interstate transport” (good neighbor) provision of the Clean Air Act (CAA) to further reduce nitrogen oxide (NOx) emissions from large industrial sources.

The “good neighbor provision” requires states to prevent sources within them from emitting pollutants that will contribute to nonattainment or interfere with the maintenance of attainment of National Ambient Air Quality Standards (NAAQS) in a downwind state.

The proposed FIP builds upon the existing Cross-State Air Pollution Rule (CSAPR) program to satisfy the good neighbor provisions for 26 states and help them meet the 2015 NAAQS for ozone of 70 parts per billion.

What states will be impacted?

The EPA’s proposed finding, as stated in the proposed rule, is that precursor NOx emissions from the 26 upwind states, listed below, significantly contribute “to downwind nonattainment or [interfere] with maintenance of the 2015 ozone NAAQS in other states, based on projected [NOx] emissions in the 2023 ozone season.”

New upwind states subject to the proposed rule that have not been previously included in the geographic scope of the CSAPR include California, Nevada, Utah, and Wyoming.

Expanding the CSAPR

Under the CSAPR, each state is provided an emissions budget and allocates authorizations to pollute—referred to as allowances—to the affected sources in the state based on that emissions budget. Each affected source has flexibility in determining how to comply with the number of allowances it has been issued and may buy and sell allowances, provided it holds enough allowances to cover its emissions by the end of the compliance period. Over time, state emissions budgets are ratcheted down, and overall emissions decrease.

The existing CSAPR program includes 22 states subject to regulations requiring those states to limit NOx emissions from fossil fuel-fired electric generating units (EGUs) during ozone season, which runs from May 1 to September 30 each year. 

Changing geography. The proposed FIP seeks to expand the CSAPR to 25 states beginning in the 2023 ozone season. All of the aforementioned 26 states, except California, would receive EGU emissions budgets. Delaware, Nevada, Utah, and Wyoming are new to the CSAPR EGU program. Iowa and Kansas “are part of the existing CSAPR ozone-season trading program but would not receive amended ozone-season NOx budgets under the proposed rule,” reports the National Law Journal. “Iowa and Kansas would remain subject to the existing program but would not be part of the new one.”  

Changing sources. “The proposed rule also indicates EPA is also looking to regulate a broader range of sources of NOx emissions under this Clean Air Act program than it has historically,” says Brownstein Hyatt Farber Schreck LLP in a Lexology article. Beginning in 2026, the following industrial sources beyond the power sector would be newly regulated under the proposed changes to the CSAPR:

• Reciprocating internal combustion engines in pipeline transportation of natural gas;
• Kilns in cement and cement product manufacturing;
• Boilers and furnaces in iron and steel mills and ferroalloy manufacturing;
• Furnaces in glass and glass product manufacturing; and
• High-emitting, large boilers (greater than 100 million British thermal units per hour (Btu/hr) in basic chemical manufacturing; petroleum and coal products manufacturing; and pulp, paper, and paperboard mills.

All of the aforementioned 26 states, except Alabama, Delaware, and Tennessee, would receive non-EGU emissions budgets. California is the only state included in the proposed CSAPR exclusively for non-EGU emissions sources.

“In addition to including new NOx limits for certain industrial sources, the proposed rule requests comment on potential control strategies for other sources, such as municipal waste combustors,” the Brownstein Hyatt article says.

Other provisions. The proposed changes to the CSAPR also include establishing a backstop daily emissions rate of 0.14 pounds per million Btu (lb/mmBtu) for coal-fired steam units greater than or equal to 100 megawatts beginning in 2024, and any excess emissions would incur a 3-for-1 allowance surrender ratio under the trading program.

There will be a limited emissions allowance bank to incentivize long-term NOx reductions, and beginning in 2025, there will be annual updates to state emissions budgets to factor in new units, changed operations, and retiring units.

Cost/benefit of implementation

The estimated cost to implement these emissions reductions is $1.1 billion. The EPA estimates 2026 monetized benefits from the proposed rule to be as high as $18 billion, with annual monetized net benefits of $15 billion each year from 2023 to 2042. (All monetary values are based on 2016-dollar values.)

“Together, these NOx control strategies would achieve health and environmental benefits that far outweigh the costs,” an EPA press release says. “In 2026, EPA projects that the proposed rule would prevent approximately 1,000 premature deaths and avoid more than 2,000 hospital and emergency room visits, 1.3 million cases of asthma symptoms, and 470,000 school absence days. Reducing ozone levels also would improve visibility in national and state parks and increase protection for sensitive ecosystems, coastal waters, estuaries, and forests.”

Potential legal battles

FIPs and State Implementation Plans (SIPs) are historically hotly contested by states and environmental groups. States want to be in charge of their own implementation plans rather than being required to follow the FIPs. And, obviously, environmental groups want the most stringent regulations possible.

“An environmental group recently filed a lawsuit against EPA (Wildearth Guardians v. EPA) to compel the agency to include New Mexico under a FIP for its ozone contributions to Colorado and Texas, alleging New Mexico failed to submit a SIP addressing those contributions,” Brownstein Hyatt continues. “Notably, EPA’s proposal does not include New Mexico.”

As another example, Texas has been in an ongoing battle with the EPA over alleged nonattainment of NAAQS standards in El Paso County, where the Texas Commission on Environmental Quality (TCEQ) filed a petition dated January 28, 2022, asking the D.C. Circuit Court of Appeals to review the EPA’s revised findings that ozone levels in El Paso County exceed the 2015 NAAQS.

It is likely that some states will challenge the EPA proposal in an attempt to be removed from these requirements during the rulemaking process.

Comments

Comments on the proposed rule will be accepted until June 6, 2022, via the Federal eRulemaking Portal utilizing docket #EPA–HQ–OAR–2021–0668.