The Environmental Protection Agency (EPA) recently proposed a Federal Implementation Plan (FIP) that has important implications for powerplants and other industrial nitrogen oxide (NOx) sources in the Western United States, including for Utah, Wyoming and Colorado, as these states continue to grapple with ozone attainment. The agency proposed the plan under its “good neighbor” Clean Air Act authority aimed at establishing NOx reductions from power plants and certain other industrial sources, including large (> 1000 hp) stationary engines in the natural gas pipeline and transportation sector. For the first time, EPA identified the western states of Nevada, Utah and Wyoming as upwind states subject to plan reductions.

EPA’s proposal is intended to address upwind states’ obligations under section 110 of the Clean Air Act to not interfere with downwind states’ ability to comply with the 2015 ozone National Ambient Air Quality Standard (NAAQS). This rule proposes the following:

• Starting in the 2023 ozone season, 25 states would need to comply with ozone season emissions budgets for power plants through participation in a revised version of the Cross-State Air Pollution Rule’s NOx Ozone Season Group 3 Trading Program. However, if a state submits, and EPA approves, a State Implementation Plan (SIP) that achieves emission reductions sufficient to comply with good neighbor obligations, it would not be required to participate in the FIP.
• Starting in 2024 for certain power plants in covered states, EPA proposes establishing a backstop daily emissions rate of 0.14 lb/mmBtu for coal-fired steam units greater than or equal to 100 megawatts. Emissions in excess would incur a 3-for-1 allowance surrender ratio under the trading program.
• Beginning in 2026, the rule proposes new NOx limits in 23 states from certain non-power plant industrial stationary sources, including reciprocating internal combustion in pipeline transport of natural gas sources, kilns in cement and cement product manufacturing sources, and high-emitting equipment and large boilers in basic chemical manufacturing and petroleum and coal products manufacturing. EPA also is exploring control strategies for other sources.

With this proposal, EPA is looking to impose federal requirements over a greater geographic region and on more sources of NOx emissions, including the gathering, boosting and transmission segments of the oil and gas sector. For the first time, the western states of Nevada, Utah and Wyoming would be required to submit SIPs that address impacts to neighboring states or be subject to the FIP. EPA’s air quality modeling and contribution analysis for 2023 shows that these states are above the 1% contribution NAAQS threshold established by EPA. It is unclear whether these states will challenge EPA’s findings or attempt to be removed from the good neighbor requirements during the rulemaking process. The proposed rule also indicates EPA is also looking to regulate a broader range of sources of NOx emissions under this Clean Air Act program than it has historically. In addition to including new NOx limits for certain industrial sources, the proposed rule requests comment on potential control strategies for other sources, such as municipal waste combustors.

EPA is not the only organization looking westward. An environmental group recently filed a lawsuit against EPA to compel the agency to include New Mexico under a FIP for its ozone contributions to Colorado and Texas, alleging New Mexico failed to submit a SIP addressing those contributions. Wildearth Guardians v. EPA, Case No. 22-cv-174 (D.N.M. filed Mar. 8, 2022). Notably, EPA’s proposal does not include New Mexico.

Comments may be submitted on the proposed rule once it is published in the Federal Register. (The Feb. 28, 2022, proposal released by EPA was the prepublication version.) Our attorneys and policy advisors are familiar with changing requirements under the Clean Air Act and the federal rulemaking process. We would be happy to answer any questions your company may have about how these proposed rules may impact your company or industry.