Attention NSR Geeks: EPA Clarifies Applicability Approach

by Stoel Rives LLP

Stoel Rives LLP

On December 7, 2017, EPA administrator Scott Pruitt announced an approach to New Source Review (NSR) applicability that supports presidential priorities for streamlining permit requirements: “New Source Review Preconstruction Permitting Requirements: Enforceability and Use of the Actual-to-Projected-Actual Applicability Test in Determining Major Modification Applicability.” (It is obviously not a presidential priority to streamline the titles of EPA memoranda.)

The new approach interprets existing regulatory provisions and NSR Reform commentary to afford sources more discretion and self-governance over pre-project emissions calculations, specifically the actual-to-projected actual math.  For example, under EPA’s newly announced interpretation of 40 CFR §52.21(b)(4)(41)(ii), a calculation of projected actual emissions can include a source’s “intent to actively manage future emissions from the project on an ongoing basis to prevent a significant emission increase or a significant net emissions increase from occurring.”  EPA concludes that the owner or operator’s intent to manage emissions after the project is “relevant information” that can be considered along with other relevant information in the projection.  This approach affords owners and operators more latitude than was accepted under previous EPA interpretations, to apply post project intentions to “manage” emissions.

Departing from EPA’s well known disregard for the excludable emissions portion of an applicability calculation, EPA’s new approach provides rare affirmation for the demand growth exclusion and for reducing projected actual emissions by excludable emissions.  EPA recognizes emissions increases may be caused by multiple factors and cautions sources to exercise judgment to exclude increases “for which the project is not the ‘predominant cause’” citing 45 Fed. Reg. 32327 (1992).  Validation of the excludable emissions element of the applicability calculation and discretion to consider how emissions may be actively managed to prevent significant increases breathe new life into NSR applicability math.

EPA also offers a refreshing self-governance approach to NSR compliance. EPA states that there is “no mechanism for agency review of procedurally compliant emissions projections” and EPA does not intend to “substitute its judgment for that of the owner or operator by ‘second guessing’” the emissions projections. The Clean Air Act provides “ample authority to enforce the major NSR requirements” if projects result in significant emissions increases; sources need not obtain approval of pre-project NSR applicability analyses before construction. Now that’s streamlining and burden reducing that sharply contrasts with EPA’s frequent second guessing, recalculating, and revising of sources’ emissions projections.

So long as owners and operators conform to the record keeping, reporting and notification requirements of the “reasonable possibility” provisions, EPA intends to focus on the actual emissions recorded during the 5 or 10 year post-project period to evaluate enforcement, and does not plan to initiate enforcement unless post-project actual emissions reveal a significant (or significant net) emissions increase. 

EPA’s refreshed approach responds to ongoing litigation in U.S. v DTE Energy Co., 711 F.3d 643 (6th Cir 2013) and U.S. v DTE Energy Co., 845 F.3d 735 (6th Cir 2017); applies for now pending further agency review of NSR generally; and does not necessarily apply to ongoing enforcement matters that will be considered case-by-case, according to Administrator Pruitt’s memo.

This guidance should apply for now to EPA permitting review and to EPA enforcement decisions.  Take caution until it is clear that this guidance will withstand the litigation that environmental activists will likely bring.  Be mindful of how state and local implementing agencies incorporate this guidance into their programs.  And, as we know, there’s always the whim of a future Administration to reckon with.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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