On the last day of 2002, the U. S. Environmental Protection Agency ("EPA") published long-awaited regulations governing the New Source Review ("NSR") programs mandated by Parts C & D of Title I of the Clean Air Act. Through that rulemaking (referred to as the "NSR Reform" initiative), EPA promulgated regulatory improvements in the way the NSR program works for existing facilities. At the same time, EPA requested public comment on a proposed rule concerning the "routine maintenance, repair and replacement" exemption under the NSR Program. The improvements effected by the final NSR Reform regulations and the proposed "clarification" of the contentious "routine maintenance" exemption represented the culmination of tremendous efforts by industry, environmental groups, state regulatory authorities and EPA over the course of the past ten years.
Interested parties, particularly private industry, now hold their breath wondering if those efforts were in vain. On July 25, 2003, EPA announced that it will reconsider parts of the December 31st NSR Reform rulemaking. While it is widely believed that EPA's reconsideration of the rules will leave those program improvements basically intact, six contested issues under reconsideration have the potential to change the final makeup of the NSR program.
The significance of EPA's current reconsideration effort is underscored by appreciating the momentous improvements made to the NSR permitting program through the final NSR Reform rules. Those improvements included five substantive revisions to the NSR preconstruction permitting requirements, summarized below:
- Methodology for Establishing "Baseline Actual Emissions" – This new methodology for establishing past "actual emissions" from an existing source allows pre-change emissions to be calculated using any consecutive 24 months during the preceding ten years. The new calculus will allow sources to utilize a more accurate emissions baseline reflecting fluctuations in the business cycle over time.
- "Actual-to-Projected-Actual" Applicability Determination – Prior to the NSR Reform rulemaking, the "actual-to-potential" test was used to determine whether a proposed change at an existing facility would result in a "net significant increase" in regulated air pollutants subject to NSR review. The "actual-to-potential" test was the single most controversial aspect of the NSR requirements for existing sources.
- Plantwide Applicability Limitations ("PALs") – The use of PALs gives facility operators the ability to manage facility-wide emissions without triggering NSR review requirements. In its implementation, a facility operator obtains a permit with facility-wide caps on actual emissions, known as PALs. Changes to the facility can proceed without triggering NSR review if post-change actual emissions stay below the caps.
- Exemption for "Clean Units" – A designated "clean unit" is subject to allowable limits based on state-of-the-art controls, such as Best Available Control Technology. An emission unit with "clean unit" status may undergo physical or operational changes without triggering NSR review, if the post-change emissions stay below the allowable limits.
- Exemption for Pollution Control Projects – The NSR Reform regulations replaced a similar exclusion available only to the electric utility industry and codified a 1994 EPA policy statement. Under this exclusion, a facility operator may install specified pollution control or prevention equipment ("PCPs") without triggering NSR review and with minimal agency oversight. For PCPs identified by the new rule, i.e., "listed" PCPs, a facility operator can proceed with the PCP without obtaining a permit after giving notice to permitting authorities.
Following publication of the December 31st NSR Reform regulations, EPA received numerous petitions, filed pursuant to section 307 of the Clean Air Act, requesting reconsideration of many aspects of the final rules. EPA has agreed to proceed with reconsideration of six issues raised by the Petitioners and will decide by October 30, 2003, whether to proceed with the formal reconsideration process for any of the other issues raised by the Petitioners.
Although EPA agreed to reconsider six issues associated with the final NSR Reform rules, it did not agree to stay or suspend the legal force and effect of the final rules. In those states with a delegated NSR program (federal NSR program administered by the State/local permitting authority), the program changes implemented by the final NSR Reform rules are already in effect and will remain in effect. Those States and local permitting authorities with SIP-approved NSR programs (EPA-approved NSR programs authorized by State law), will still have up to three years to implement changes to the State's NSR program to incorporate the NSR Reform changes.
The six issues that EPA has agreed to reconsider are summarized below:
- Supplemental Analysis of the Environmental Impact of the 2002 Final NSR Improvement Rules – Prepared after the 1996 NSR Reform proposal but prior to promulgation of the final rules in 2002, this EPA report provided additional analysis of the potential environmental effects associated with the final NSR Reform rules. As a result of its analysis, EPA concluded that the NSR Reform rules would result in a net benefit to the environment as compared to the former NSR rules. Given the opposition to the NSR Reform rules from various States and environmental groups, EPA's conclusion of environmental benefits may have touched a raw nerve. EPA's reconsideration process will determine the accuracy of its conclusion as well as whether the report was timely and appropriately considered during the rulemaking process.
- PALs: Establishing Baseline Actual Emissions – In establishing facility-wide caps or PALs based on actual emissions, the permitting authority is directed to use any consecutive 24-month period during the preceding 10 years. If the selected 24-month period is not the most recent 24-months, the cap must account for new units added and existing units shut down after the selected 24-month period. Otherwise the cap would be set artificially high by including within the allowable cap the actual emissions from shutdown units. Conversely, the cap would be set artificially low by omitting emissions from units added after the selected 24-month baseline period. Petitioners challenged certain features of this methodology (selected by EPA as the best means to "equalize" the baseline actual emissions used in establishing PALs), particularly EPA's decision to use the allowable or potential emissions for those emission units added after the selected 24-month period.
- PALs: Elimination of Synthetic Minor Limits – In issuing a permit with PALs, the permitting authority may eliminate conditions imposed in previous construction permits to limit potential emissions below NSR "major" source or modification thresholds. Essentially, the facility-wide cap or PAL on emissions serves the same purpose as limits imposed to create a "synthetic minor" source or modification, because either approach is designed to avoid triggering NSR review requirements. When the PAL expires, those synthetic minor limits of previous permits are not reinstated but the new permit will include limits on individual emissions units based on the total facility-wide emissions allowed by the PAL. Petitioners objected to the permanent deletion of pre-existing synthetic minor limits.
- Actual-to-Projected Actual Test – Recordkeeping and Reporting Requirements – Based on its experience with the WEPCO rule applicable to electric utility units, EPA decided to limit the reporting and recordkeeping requirements (during the 5 or 10 year period following a particular change), to those changes with a "reasonable possibility" of causing a significant emissions increase. Without the "reasonable possibility" qualifier, the NSR rules would require recordkeeping and reporting for all physical or operational changes occurring during the relevant post-change period. Petitioners expressed concerns about what constitutes a "reasonable possibility" and who makes the decision.
- Actual-to-Projected Actual Test – Availability of New Test for Replacement Units – Relying once again on its experience with the WEPCO rule, EPA determined that the actual-to-projected actual test for calculating whether a proposed change would result in a "net significant increase" will be available for changes involving replacement of existing emission units. Replacement or reconstructed units are treated as modifications only if the replacement or reconstruction of the unit results in a significant increase as measured by the new test comparing past actual emissions to future projected actual emissions rather than future potential emissions.
- Exemption for Clean Units: Effect on Clean Unit Status Due To Re-designation – The final NSR Reform rules allow a "Clean Unit" to retain its status even if the area in which the unit is located subsequently is re-designated from an attainment area to a non-attainment area. By maintaining Clean Unit status, such units can rely on the exemption from NSR review for physical and operational changes at the unit that are consistent with allowable emission limitations or work practice standards and do not alter basic design characteristics relied upon to establish control requirements for the unit.
EPA's reconsideration process includes a public comment period and hearing scheduled for August 14, 2003, during which interested parties present their concerns about the NSR Reform issues under reconsideration. Although further legal challenges to the final NSR Reform regulations are possible, EPA's current reconsideration effort is believed to be the only significant opportunity to dismantle the NSR program improvements achieved through the NSR Reform rulemaking.