EPA NSR Rule Plans for 2023

In the semiannual regulatory agenda publication and at the Air & Waste Management Association (A&WMA) Annual Conference and Exhibition in Orlando, EPA representatives announced major regulatory development and/or guidance objectives for 2023 and early 2024. Several of these initiatives potentially impact the new source review programs: (1) reconsideration of the Project Emissions Accounting rule; (2) revisions to minor new source review program requirements for state implementation plans; (3) revisions to the fugitive emissions rules; and (4) change to the definition of applicable requirements under title V as it relates to new source review programs. This article touches on each of the changes and what is known, as of the current time, about EPA's goals.

ANALYSIS

Project Emissions Accounting Rule

On November 24, 2020, EPA published the "Project Emissions Accounting" (PEA) rule, which allowed sources to consider emissions reductions from projects in addition to emissions increases from the project in "Step 1" of the PSD / NNSR applicability determination instead of waiting to consider all emissions decreases in "Step 2." While EPA denied a request for reconsideration by EDF, NRDC, EIP and the Sierra Club, it undertook a voluntary reconsideration of the issues raised in that petition. EPA has characterized the questions raised by the petition for reconsideration and its reconsideration as:

• Does the PEA rule fail to ensure that offsetting emissions decreases used in Step 1 result from the project?

• Does the PEA rule allow sources to use non-contemporaneous emissions decreases?

• Does the PEA rule faile to ensure that projected emissions decreases "will occur and will be maintained" over time?

At the A&WMA conference, EPA indicated that it has undertaken some outreach activities to discuss these issues and that it is presently considering action along the following lines, subject to public notice and comment:

• Adding a definition of "project" to the regulations;

• Potentially requiring additional recordkeeping, such as requiring certain pre-project records;

• Possibly eliminating the current two step approach (although EPA representatives stated that they had received considerable negative feedback about eliminating the two step approach).

EPA representatives stressed that all discussion is still "pre-decisional" and that a proposed rule is expected prior to the end of 2023.

Revisions to the State minor NSR program rules

EPA has also released a regulatory agenda item for "Revisions to Minor NSR Program Requirements for State Implementation Plans." As EPA noted in the RIN and at A&WMA, "most of these NSR rules have been unchanged for more than 40 years." EPA stated that it purpose "would be to bring the older rules as they pertain to such sources and modifications up to modern standards, improve the accountability of the minor NSR program to address the underlying requirements of the Clean Air Act, and address minimum requirements for consistent implementation while continuing to allow agencies flexibility in some areas of their program." During discussion and questions, it appears that EPA has concerns about enforceability, effectiveness of limitations on potential to emit, and potentially sees changing of the minor NSR program rules as a way to enhance "consistency" across state minor NSR programs.

Sentiment at the A&WMA conference, which is comprised of many representatives of state and local permitting authorities was decidedly mixed, with several local authority representatives noting that state and local programs are designed to address local issues and expressing concern that more prescriptive standards might undermine these developments. Industry representatives suggested that EPA is overly concerned with semantic differences between programs that have little practical significance and that additional rule making is unwarranted. A proposal is expected before the end of 2023.

Fugitive Emissions

In 2008, EPA reconsidered the Fugitive Emissions rule. The reconsideration was reconsidered and stayed in 2011. EPA is now proposing to take this action up again. For those of you who have lost track in the intervening 14 years, the 2008 rule (subsequently stayed) provided that "fugitive emissions be included in determining whether a physical or operational change results in a major modification only for sources in the source categories that have been designated through rulemaking pursuant to section 302(j) of the Clean Air Act." 73 Fed. Reg. 77882 (Dec. 19, 2008). This action was reconsidered and stayed in 2009. On October 14, 2022, EPA proposed to repeal the 2008 rule and to reaffirm that "all existing major stationary sources would be required to include fugitive emissions in determining whether a physical or operational change constitutes a 'major modification,' requiring a permit under" PSD or NNSR. 87 Fed. Reg. 62322-23 (Oct. 14, 2022). NSR Law Blog previously discussed the proposed rule in an article New Fugitive Emissions Proposal. Action is expected before the end of 2023.

NSR/Title V Interaction

Although not presented as an NSR rule, EPA is considering proposing a rule "to clarify the definition of 'applicable requirement' wihtin its title V operating permit program regulations to address the extent to which other Clean Air Act (CAA) requirements -- including facility emission control requirements established under the New Source Review preconstruction permitting program and requirements under the CAA section 112(r)(1) "General Duty Clause" -- may be reviewable, implemented, and/or modified through the Title V permitting and petition process." Action is expected in January 2024.

COMMENTARY

EPA has given itself a full plate of rulemaking and policy issues to confront in a relatively short time. Several of these proposals are likely to be controversial and may draw litigation from industry and states as well as environmental advocacy organizations. A few thoughts on each:

Project Emissions Accounting rule. This rule has been in effect for a while with no major reported problems or abuses. A question was asked at the A&WMA annual conference NSR session whether any of the regulators in the room had encountered a questionable activity under the rule and no examples were given. It is likely that EPA will struggle to develop a definition of "project" that is sufficiently flexible to accommodate the wide variety of sources and projects underway. In short, EPA should consider whether this is a solution in search of a problem that is better left to the permitting authorities to resolve on a case-by-case basis.

Minor NSR Program Regulations. The major apprehension shared by many is that EPA, which has little experience with day-to-day administration of minor NSR, will seek to force states into a "consistent" framework, an apprehension not reduced by EPA's statement that it is seeking consistent minimums and that states should only have "some" areas of flexibility in administering their program. This could yet turn into a major clash over the future scope of "cooperative" versus "coercive" federalism.

Fugitive Emissions. As stated in the NSR Law Blog article, EPA will need to provide guidance on how to reconcile a stronger focus on fugitive emissions for applicability purposes with the amorphous definition of "physical change" and "change in the method of operation" under the rules.

Title V. To the extent this is an effort by EPA to assert its authority to review NSR processes and decisions as part of the Title V objection process, the Clean Air Act does not give it that authority for the reasons stated by the Fifth Circuit in Environmental Integrity Project v. U.S. EPA (see NSR Law Blog article), a conclusion not changed by the poorly reasoned Tenth Circuit decision in Sierra Club v. U.S. EPA (see NSR Law Blog article). EPA's action in this area may thus draw more scrutiny than typical.

Stay tuned for more developments.