New Source Review

NSR is applied prior to construction in order to determine what type of permit a facility needs and whether pollution control measures are required. The NSR permitting regime includes three types of permits based on the size of the facility/modification and the quality of air where the facility is located: (1) Prevention of Significant Deterioration (PSD) permits for new major sources or major modifications to sources in areas that meet the National Ambient Air Quality Standards for the most common air pollutants, (2) Nonattainment NSR permits for new major sources or major modifications to sources in areas that do not meet those standards, and (3) Minor NSR permits for sources or modifications that do not rise to the level of “major.”

Applying NSR to a change at an existing source requires a preliminary assessment to determine whether the change – either a physical change to the facility or a change in the method of operation – is considered a modification for NSR permitting purposes.  If it is a modification, then two steps are utilized for determining whether the modification is considered “major”:

• Step 1: Does the modification by itself result in a significant emissions increase?
• Step 2: Will the modification result in a significant net emissions increase, given other contemporaneous increases and decreases at the facility?

If either question is answered in the negative, then the facility does not need a PSD or Nonattainment NSR permit for the modification. For construction of a new facility or structure, the same two steps are applied to determine if a major NSR permit is required. Accordingly, EPA’s interpretations of how to implement these two steps are essential to the stringency of the NSR regime.

Generally, when industry lawfully adheres to the NSR requirements, the permits do all of the work: pollution releases are prevented, public health and the environment are protected, and industry expands. However, when needed, EPA can enforce NSR through litigation, which is an option the agency has pursued strategically at specific moments in its history.

In 1999, the Department of Justice initiated lawsuits against multiple utility companies, alleging that the utilities unlawfully undertook construction projects without obtaining NSR pre-construction permits. As an example of the impact of these lawsuits, in 2007, American Electric Power agreed to a record settlement that included $4.6 billion to upgrade pollution controls at 16 power plants, $15 million in civil penalties, and $60 million to mitigate the environmental damage that resulted from the unlawful pollution. EPA estimated that the benefits from operating the pollution control equipment – which should have been installed through NSR permitting – would include $32 billion in annual avoided health-related costs.

May 8, 2007 EPA publishes a Supplemental Notice of Proposed Rulemaking proposing multiple alternatives to modify NSR emissions accounting for power plants. The agency proposed either changing the test for NSR applicability at Step 1 from a comparison of annual emissions to a comparison of hourly emissions or adding a preliminary hourly emissions test prior to Step 1. Any of the alternatives would result in a less stringent NSR program, as industry could choose to operate for more hours each year and not be subject to the emissions control technology required by NSR permitting. EPA did not finalize a rule.

Jan. 15, 2009 EPA publishes a final rule modifying its longstanding policy regarding the aggregation of emissions for the purposes of Step 1 from multiple proposed modifications at a facility. The rule stated that only projects that are “substantially related” must be aggregated, which was a constraint of the previous policy. EPA further explained that timing was not a dispositive trait of relatedness and that the test was whether the projects have a “substantial technical or economic relationship.” The rule also established that projects occurring more than three years apart are presumed unrelated, unless otherwise demonstrated.

Jan. 30, 2009 The National Resources Defense Council files a petition with EPA to reconsider and stay the final rule for project aggregation, arguing that the rule unlawfully modified its NSR policy.

Feb. 9, 2009 EPA extends the effective date of the January 15 final rule by 90 days in order to reconsider certain aspects of the rule.

March 18, 2009 EPA publishes a proposed rule to further delay the effective date of the aggregation rule. Following the notice and comment period, EPA later finalized this rule extending the effective date of the aggregation rule for an additional 12 months.

April 15, 2010 EPA publishes a proposed rule to revoke the January 2009 aggregation policy.

May 18, 2010 EPA stays the aggregation policy until it completes its reconsideration of the rule.

Dec. 7, 2017 EPA releases a policy memo stating that it would no longer re-examine — or second guess — industry’s projections of the emissions increases that will result from a modification at a facility. This essentially leaves it to industry to ensure the accuracy of its emissions projections. The memo also states EPA’s intent to not pursue legal enforcement options based on industry’s projections; instead, EPA will wait until multiple years of emissions data can be analyzed. EPA’s new policy is in tension with a 6^th Circuit case earlier in the year that upheld EPA’s authority to review industry’s calculations of projected emissions.

This change in EPA’s procedures means that the agency will not actively ensure the accuracy of industry’s projections of increased emissions, even though these emissions projections determine the level of pollution control technology that a facility must operate under NSR. For more information on the significance of this change, see EELP’s New Source Review Enforcement Memorandum.

March 13, 2018 EPA releases a memo outlining changes to its method for calculating emissions projections at Step 1 of the NSR process. EPA takes the position that any emissions decrease that may result from the proposed project should be considered at Step 1, whereas the agency previously only considered emissions increases at units that are a part of the project.

March 29, 2018 A coalition of environmental groups files a petition for review of the March 2018 memo in the D.C. Court of Appeals, Environmental Defense Fund v. EPA, No. 18-1149.

April 30, 2018 In a letter to the Pennsylvania Department of Environmental Protection, EPA establishes a new method for determining whether facilities are under “common control” for the purpose of NSR permitting. In the letter, EPA narrows the determination of “common control” to focus on “the power or authority of one entity to dictate decisions of the other that could affect the applicability of, or compliance with, relevant air pollution regulatory requirements.” The “common control” determination ensures that jointly-managed facilities are treated as one source under NSR and Title V permitting. A narrowed interpretation could result in fewer sources being subject to NSR requirements, because the facilities’ emissions will be considered separately rather than jointly when determining NSR applicability.

June 26/27, 2018 Seventeen industry groups move to intervene on behalf of EPA in Environmental Defense Fund v. EPA, No. 18-1149.

July 13, 2018 Following an unopposed motion by the environmental groups, Environmental Defense Fund v. EPA is held in abeyance while EPA develops the proposed rule for NSR accounting.

Aug. 21, 2018 EPA proposes the Affordable Clean Energy Rule (ACE) for power plants. The proposed rule includes an amendment to change the method for calculating whether NSR applies to modifications at power plants. It proposes adding an hourly emissions test to determine whether emissions will increase sufficiently to trigger NSR before the existing annual emissions test. EPA acknowledges that this creates a more lenient NSR regime than the current annual emissions test. If finalized, this rule would mean that facilities could significantly increase their annual emissions of harmful pollutants without being subject to NSR simply by operating for more hours each year but ensuring that hourly emissions are not significantly increased. For more information on the proposed rule’s changes to NSR, see EELP’s Memorandum on EPA’s Proposed Changes to New Source Review in ACE.

Sep. 5, 2018 EPA issues draft guidance for the definition of “adjacent” when determining what constitutes operations at a single stationary source for the purpose of NSR pre-construction permitting. Generally, the regulations define sources to mean buildings, structures, facilities, or installations that have three characteristics: (1) located on contiguous or adjacent properties; (2) are a part of the same industrial grouping; and (3) are under common control. Historically, EPA interpreted adjacent in the first requirement to mean more than just physical adjacency and to include operations that were interrelated enough to be functionally proximate. For industries other than oil and gas, EPA will now exclusively consider physical proximity when determining adjacency. This could allow nearby structures that are connected but not physically adjacent to avoid the stringent NSR permit requirements by counting as two minor sources, rather than one major source. This action will also apply to Clean Air Act Title V operating permits.

Oct. 11, 2018 EPA files its first status report in Environmental Defense Fund v. EPA, No. 18-1149. The agency confirms that it is developing the proposed rule for project emissions accounting.

Nov. 9, 2018 EPA publishes draft guidance proposing to broaden exceptions to the definition of ambient air – the air that Clean Air Act permitting covers. When analyzing a stationary source’s emissions, EPA looks only to the impact on the ambient air, which is defined as “that portion of the atmosphere, external to buildings, to which the general public has access.” 40 CFR § 50.1(e). Previously, “ambient air” did not include air over land owned by the source if the public was excluded from the land by a fence or other physical barrier. EPA is now proposing to exclude air over privately-owned land that deters the public from entering through “other methods,” such as surveillance and monitoring. This change would mean that air pollution levels over the land would not be measured for permitting purposes, even if the public could easily access the property.

Nov. 15, 2018 EPA publishes a final rule removing the stay on the 2009 emissions aggregation rule and retaining the 2009 policy. The action was effective upon publication, meaning that EPA and facilities will now return to the “substantially related” test when determining whether emissions from multiple modifications must be combined for NSR Step 1 emissions accounting.

Aug. 9, 2019 EPA publishes a draft rule intended to relax the two step review process. Under the proposal, EPA would allow regulated entities to consider “both emissions increases and emissions decreases that result from a given proposed project” at Step 1. This would fundamentally change the NSR accounting process, which previously studied whether a modification by itself would result in significant emissions increases at Step 1, with no consideration of other decreases. This rule formalizes the March 13, 2018 guidance that is still on hold.

Nov. 5, 2019 After 11 years, EPA declines a 2008 petition from New Jersey to reconsider a final rule on New Source Review record-keeping. The rule, finalized in 2007, specifies thresholds for when modifications to a major stationary source trigger additional record-keeping requirements. EPA’s decision ends the D.C. Circuit’s hold on New Jersey’s petition, restarting litigation in the case. The court hears oral arguments on Nov. 2, 2020. New Jersey v. EPA, No. 08-01065 (D.C. Cir.).

Nov. 26, 2019 EPA publishes final guidance that “interprets the term ‘adjacent’ to entail physical proximity between property,” such as a common boundary or border. EPA recommends that the guidance apply prospectively and does not recommend retroactively applying this decision to completed permitting actions.

Dec. 3, 2019 EPA publishes final guidance expanding the exclusions to ambient air. The guidance re-defines ambient air as excluding ambient air “where the source employs measures, which may include physical barriers, that are effective in precluding access to the land by the general public.”

Feb. 13, 2020 EPA releases draft guidance regarding plantwide applicability limitation (PAL) provisions.  PAL permits offer flexibility to plants by establishing plantwide emissions limits, rather than limits for individual sources within the plant. EPA’s guidance memo addresses multiple aspects of PAL permitting, including renewal, termination, and monitoring requirements. In the memo, EPA also interprets the NSR regulations related to how the agency calculates baseline annual emissions for units that have been replaced. This calculation is important for determining the plant’s allowable emissions level. For example, a facility may replace an old heater with a more efficient, lower-emitting heater. Rather than integrate the annual emissions of the replacement heater, EPA appears to be interpreting the NSR regulations to allow facilities to continue using the older heater’s annual emissions. This could allow facilities to report higher annual emissions and receive a higher plantwide emissions level as a result.

Feb. 12, 2020 EPA states that it will not retroactively apply its revised guidance on New Source Review determinations. For example, if EPA previously determined that multiple facilities constituted a single source for the purposes of New Source Review, those facilities cannot apply to change that determination based on EPA’s new definition of “adjacent” or “common control”. EPA announces this policy in a response letter to Eastman Chemical Company’s request that EPA reconsider a prior determination.

March 25, 2020 EPA releases a draft guidance memo narrowing the definition of “begin actual construction” in the NSR regulations. The pertinent regulation states “no new major stationary source or major modification…shall begin actual construction without a permit…” (emphasis added) and refers to “construction activities on an emissions unit.” Under EPA’s current definition, the phrase “begin actual construction” applies to any on-site construction activities of a permanent nature. This means that owners/operators need to obtain an NSR permit before starting most construction. Under EPA’s new proposal, “begin actual construction” will apply only to construction on an emissions unit. Businesses could begin construction activities without first obtaining an NSR permit, so long as the construction does not modify or build a new emissions unit. In the draft guidance, EPA clarifies that this is a narrow definition and does not include construction of an “installation necessary to accommodate” the emissions unit.

Oct. 22, 2020 EPA issues a final rule allowing companies to consider both decreases and increases in emissions at Step 1, i.e. when assessing whether a proposed project will result in a “significant emissions increase” of a regulated NSR pollutant. Previously, decreases were only considered at Step 2. EPA publishes the rule in the Federal Register on Nov. 24, 2020.

Nov. 2, 2020 The D.C. Circuit hears oral arguments in a suit brought by the New Jersey Attorney General challenging the NSR record-keeping rule. Judge Walker, a recent Trump appointee to the court, questions whether New Jersey has shown the requisite harm to have standing to bring the suit. New Jersey v. EPA, No. 08-01065 (D.C. Cir.).

Jan. 22, 2021 Environmental groups sue EPA over its Nov. 24 rule to allow emitters to include both emission increases and decreases at Step 1. Environmental Defense Fund et al. v. EPA, No. 21-1039 (DC Cir.).

March 5, 2021 The DC Circuit rejects New Jersey’s challenge to the 2007 New Source Review rule, almost ten years after the original suit was filed. The rule specifies thresholds for when modifications to a major stationary source trigger additional record-keeping requirements. Judge Walker dissented, arguing that the court should have rejected the suit on the grounds that New Jersey lacked standing to appeal the case. New Jersey v. EPA, No. 08-01065 (D.C. Cir.). 

Oct. 12, 2021 Administrator Regan denies a petition from environmental groups to reconsider or stay the Trump administration’s change to NSR permitting regulations, but states that EPA plans to initiate a rulemaking process to revisit the change. Regan also states EPA will consider revoking or revising Administrator Pruitt’s related 2018 memo, but does not say when.

Dec. 10, 2021 Environmental groups challenge EPA’s Oct. 18 decision to retain the Trump-era Project Emissions Accounting Rule. Env. Defense Fund, et al., v. EPA, No. 21-1259 (D.C. Cir.).

Mar. 3, 2022 The DC Circuit consolidates Environmental Defense Fund et al. v. EPA (Docket No. 21-1038) and State of New Jersey, et al v. EPA, et al (Docket No. 21-01033) under Docket (No. 21-01033). Both cases continue to be held in abeyance.

July 14, 2022 EPA publishes a report in response to the Public Employees for Environmental Responsibility (PEER) complaint alleging that Colorado’s new source review air permit program failed to ensure synthetic minor emissions sources comply with Colorado’s SIP. 

July 29, 2022 EPA publishes guidance for modeling precursors in NSR preconstruction permit review. The new policy directs regulators to holistically evaluate the impact of all relevant precursors, even if only one is significant.

Aug. 31, 2022 The Eight Circuit rejects a challenge to EPA’s decision to not aggregate two adjacent facilities (a coal plant and its associated coal mine) for purposes of its NSR analysis, thereby maintaining the currently effective Trump-era policies. By not combining the facilities for NSR, they did not trigger “major source” emissions control requirements. Casey Voigt v. EPA, No. 21-1970 (8th Cir.).

Oct. 14, 2022 EPA publishes a proposed rule that would allow EPA to consider fugitive emissions when reviewing Title V air operating permits. Comment here by Dec. 13, 2022.

Sept. 27, 2022 Administrator Regan denies Sierra Club’s request to enforce a stricter air permit for PacifiCorp’s Hunter coal-fired power plant in Utah but in doing so, also discards the Trump administration’s “second-guessing” policy by thoroughly analyzing the application’s assumptions. In the order denying Sierra Club’s petition, Administrator Regan relies on the Appleton Coated case, which established the standard of review prior to the “second-guessing” policy, to reach his conclusion.

Nov. 14, 2022 EPA extended the comment period on the proposed rule for considering fugitive emissions until Feb. 14, 2023.

Dec. 9, 2022 EPA rescinds “in its entirety” the Trump-era memo that barred EPA from “second-guessing” modified sources’ emissions projections when determining whether NSR air permits are required.

Jan. 10, 2024 EPA published a proposed rule that aims to clarify the relationship between the Clean Air Act’s title V permit program and NSR requirements. The proposed changes could reduce EPA review and oversight of NSR decisions in the title V permit process. Comments are due by Mar. 11, 2024. Submit a comment on EPA’s proposed rule on the relationship between Title V of the CAA and NSR requirements here. 

Feb. 22 2024 EPA Administrator Regan issued a draft rule proposing revisions to the preconstruction permitting regulations that apply to modifications at existing major stationary sources in the NSR program. The changes are aimed at improving implementation and enforceability of the program, while toughening air pollution permit requirements. The EPA is in the process of submitting it for publication in the Federal Register.