Locke Lord QuickStudy: EPA Proposes New Method for Determining Applicability of New Source Review Under the Federal Clean Air Act

Determining the applicability of the federal Clean Air Act’s New Source Review (“NSR”) program to new projects can be a difficult analysis.  Under EPA’s current rules, NSR applicability depends upon a two-step process.First, a calculation must be made to determine if the proposed project will cause a “significant emission increase” of a pollutant.If so, the second step requires that the facility determine if there is a “significant net emissions increase.”  If both calculations result in a determination that the emission increases are “significant” (as set forth in EPA’s rules), the proposed project is subject to NSR review. NSR applicability generally results in a longer permitting process and can require more stringent emission controls (as is the case for projects constructed in non-attainment areas). 

Under the current rules, only emission increases are considered in the first step, even if the project will result in emission decreases as well.Any emission decreases are accounted for under step two when calculating if there are any “net” emission increases.The net emission increase calculation is a complex analysis that requires the consideration of emission increases and decreases between a five-year period before construction of the proposed project and the estimated date the project is expected to result in emission increases.EPA proposes to modify its rules to allow the consideration of emission decreases in step one to help reduce the complexity in determining NSR applicability.  EPA is not proposing any changes to how the net emissions are calculated under step two.

What is the Practical Effect of this Rule on Permitting?

The practical effect of the proposed rule is to avoid the complexities of the step two analysis when the proposed project results in few, if any, additional emissions.  For example, a proposed project may involve the replacement or retirement of an older piece of equipment resulting in an overall emission decrease.However, under the current practice for determining whether the proposed project will result in a significant emission increase, only the emission increases are considered under step one, which can oftentimes result in having to undertake a step two analysis.Simply gathering the necessary information for a step two analysis can be a time-consuming task and delay the project.EPA believes that the proposed changes to its rules will encourage emission-reducing projects to go forward if the complexities of the step two analysis are avoided.

What About the State Air Permitting Programs?

If the proposed changes are adopted, the question arises on whether the states will need to modify their own rules to incorporate the EPA changes.EPA has delegated authority to most states to implement and issue permits in accordance with the federal Clean Air Act, including conducting the necessary NSR review.If a state has promulgated its own rules to implement NSR, modification of those rules would be needed before the regulated community could take advantage of the new NSR procedure in their state.

But what happens if a state decides to simply leave the current process in place?  Will the regulated community face two different methods for determining NSR applicability depending upon which states have incorporated the EPA changes and which states have not? In its preamble to the proposed rules, EPA is requesting comments on whether the proposed changes, if adopted, need to be considered as a minimum NSR program element that “must be included” in order for a state to continue to be the permitting authority for permits under the federal Clean Air Act. It appears that EPA is considering whether to require all states to adopt the new method for determining NSR applicability.

It is almost certain that should EPA adopt the proposed rules, multiple challenges will be raised in federal court by environmental groups and some states.  These EPA rules have a long road to travel before any permitting relief is realized by the regulated community.