EPA's Revisions to Project Emissions Accounting Published

EPA's proposed revisions to NSR "project emissions accounting" were published in today's Federal Register as "Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NNSR): Regulations Related to Project Emissions Accounting," 89 Fed. Reg. 36870. Comments are due no later than July 2, 2024. NSR Law Blog reviewed the pre-publication version of this rule in its article on "EPA Proposes Sweeping NSR Changes." The article includes a dispassionate analysis of EPA's proposal and proffered rationale followed by commentary on the pros and cons and validity of that rationale.

To highlight the conclusions of the commentary, the proposal would:

• Definition of "project." The proposal would change the definition of "project" to import the "substantially related test" to prevent inclusion of "unrelated projects," allowing commenters and agencies to slice and dice project proposals and allow them to determine, rather than the source owner/operator, what the project "is." EPA's proposal reverses: (1) years of permitting practice that the project proponent defines the "project" so long as it is not circumventing NSR by splitting up a single project, and (2) imposes an impossible burden on state and local permitting authorities who now must become experts in every permittee's economics and process technology to meet EPA's apparent expectation.

• Double counting. EPA queries, but fortunately does not propose, to require sources to "back out" emissions decreases that are unrelated to the project in projecting future emissions increases. This makes an already difficult topic even more difficult and would require sources to keep multiple "books" of emissions for each project within the past five or ten years.

• Step 1 reduction enforceability. EPA proposes to require emissions reductions claimed in "Step 1" must meet the same "enforceability" requirements as those for unrelated projects claimed in the "net emissions" calculations in Step 2. EPA states this change is necessary because it is uncertain whether the projected emissions decreases claimed by a project owner/operator "occur or are maintained." Currently, sources may rely upon emissions reductions achieved by the project without making them enforceable and EPA relies upon emissions inventory and reporting under the "reasonable possibility" test to ensure violations do not occur. The proposal would require sources to accept enforceable emissions reductions to use those reductions to reduce other project impacts. For some projects, such as replacements, it is difficult to see how the "reduction" won't occur. In any event, for sources it requires the trade off of certain "real" emissions decreases (plus loss of unused capacity) for "anticipated" benefits of new and untried units. EPA implies there are no costs to this approach, apparently rejecting many of the lessons learned and experience since NSR Reform in 2002.

• "Reasonable Possibility" reporting. EPA proposes to greatly increase "reasonable possibility" reporting in two ways. First, it requires "reasonable possibility" reporting to the permitting authority if a source owner/operator claims "any" reduction credit from a project, including a simple replacement project. Second, it requires much more detailed information including identification of every new, modified or affected unit and the corresponding potential to emit, projected actual emissions and baseline actual emissions (and demand growth exclusion, if claimed). EPA provides no de minimis value. The sweep of this requirement will likely delay project permitting until much more detailed engineering is completed. Finally, EPA doesn't require receiving agencies to do anything with the notices they receive. It appears to be mostly to be an effort to make it easier for third party groups to sue state and local permitting authorities.

As you can see, NSR Law Blog has some strong opinions about this proposal. Please see "EPA Proposes Sweeping NSR Changes" for a more detailed analysis and additional commentary. Given the importance of this proposal to the future of the NSR programs, NSR Law Blog urges all source owners/operators, state and local permitting authorities, and NSR practitioners to review the proposal and push back on those areas that you believe are unworkable or unwarranted. The comment deadline is July 2, 2024.