House New Source Review Reform Hearing: Can We Make Progress?

Yesterday I attended the House of Representatives Energy and Commerce Committee hearing titled “New Source Review Permitting Challenges for Manufacturing and Infrastructure.”  With the current administration and legislative balance in place, now is widely viewed as a good time to further reform, simplify, and provide clarity on what is still a very complicated New Source Review (NSR) regulatory program.  The overall purpose of the hearing was to discuss ideas on how to do just that.  Six witnesses representing the following organizations provided for a wide range of stakeholder perspectives:

• The George Washington University Law School
• Bracewell LLP
• American Forest and Paper Associated (AF&PA) and American Wood Council (AWC)
• Arkansas Department of Environmental Quality (Arkansas DEQ)
• Pennsylvania Chamber of Business and Industry (PA Chamber)
• Natural Resources Defense Council (NRDC)

Thoughts on Questions and Testimony

Republican (Majority) and Democratic (Minority) members of the Committee focused their energy and questioning on very different things that corresponded to the positions held by the Majority and Minority witnesses in attendance.  The Majority member questions and interest focused on items that followed from the opening testimony of several of the witnesses:

• The extremely long time that it currently takes to receive an NSR construction permit (on average over a year across the country).
• The manner in which the current NSR application and permitting process can discourage projects that are both economically and environmentally beneficial (discouraging innovation).
• The extensive overlap between the NSR program and other air regulatory programs that address the same criteria pollutants (e.g., BART, CSAPR, Regional Haze, State SIPs, etc.).

Recognizing these issues and the impediment they represent to growth, the Majority members questioned the witnesses on possible common sense solutions and reforms.  The witnesses from Bracewell LLP, AF&PA/AWC, Arkansas DEQ, and the PA Chamber all agreed that reform is necessary to streamline the program and to reduce regulatory uncertainty that stifles industrial facilities and that makes it difficult for regulatory agencies to provide the appropriate direction and guidance to regulated entities.  The testimony of the representative from Arkansas DEQ was particularly compelling since it made very clear the impacts not just on the regulated community, but on regulators as well.

The Minority member questions did not generally address ideas for NSR reform.  Rather, there was an extensive focus on a December 7, 2017 NSR policy memorandum issued by U.S. EPA Administrator Scott Pruitt that addressed U.S. EPA’s interpretation of projected actual emissions (PAE) estimates for projects at major sources.  The U.S. EPA policy memorandum was inaccurately portrayed as providing facilities with a shield from U.S. EPA NSR enforcement (the actual purpose of the memorandum was for U.S. EPA to provide much needed clarity on estimating PAE through plain readings of the current NSR rules).  This general thread of discussion was common in the Minority Committee members and witness discussions.

The NSR Reform Ideas

If we look through some of the bluster in the hearing, there were distinct ideas represented in witness testimony, witness statements, and in Majority member questions.  The following is a summary….if you haven’t been living and breathing NSR permitting since December 31, 2002 (NSR Reform rule date) prepare to glaze over:

• Allow Project Netting.  The current NSR review process includes two steps.  The first step accounts for the emissions increases only from the project being proposed.  The emissions increases are compared to NSR significant thresholds, and if they exceed those thresholds a second step (netting) is required.  The netting step accounts for emissions increases and decreases during a defined lookback period.  The key point here is that emissions decreases resulting directly from the current project cannot be represented in the first step, making triggering the netting step more likely and therefore making triggering NSR obligations by capturing other historic projects more likely.  The arrangement of this math is how we end up with projects that replace coal fired boilers with lower emitting natural gas fired boilers yet still trigger NSR obligations.  Allowing project netting would address this issue.
• Define Project Aggregation Criteria.  Projects that occur far apart and that are implemented for different economic and operational reasons should not be considered as a single project for evaluating NSR applicability.  Since only policy guidance is in place with no defined rulemaking on project aggregation criteria, the presumption of unrelated projects being connected can take hold in certain circumstances.  Eliminating any doubt through defined criteria will greatly reduce uncertainty that causes apprehension about the implementation of new projects.  Note that the George W. Bush Administration U.S. EPA proposed rulemaking addressing this issue that was never finalized.
• Develop more realistic ambient modeling approaches.  Current dispersion modeling procedures for comparison against the National Ambient Air Quality Standards (NAAQS) are based on layers of conservativism.  One such example is the requirement to place modeled receptors where the general public would never be or would never have routine access (e.g., a road running through a facility).  Adding more realistic approaches will streamline the NAAQS modeling process and still be protective of the environment.
• Transition NSR to a short-term emissions test.  Other regulations such as New Source Performance Standards (NSPS) are triggered when maximum short-term emissions increase.  Moving the NSR program to the same basis, rather than the current long-term basis, was discussed during the hearing.
• Allow for the clean unit and pollution control project exemptions.  If an emissions unit has already gone through NSR review historically, it would stand to reason that NSR levels of emissions control are already being utilized and NSR should not be addressed again for that equipment.  Likewise, facilities should be able to upgrade control technologies or install emissions controls to comply with regulatory obligations without having the delays that could arise from NSR for these types of projects.
• Codify U.S. EPA’s recent PAE guidance memorandum.  Arkansas DEQ encouraged U.S. EPA to codify the policy outlined in the December 7, 2017 memorandum into a final rule.

This list is not all inclusive but represents a cross section of the ideas discussed.  One, all, or a combination of them being implemented would be in the step in the right direction for streamlining the NSR process.

What will get done?

I apologize for the misleading headline that implies that we have an answer.  At this point, nobody knows exactly what will happen next with NSR reform.  As we’ve described in other recent articles, U.S. EPA is likely to prioritize reform that can be accomplished through policy guidance.  Any form of rulemaking will be an extensive, time-consuming, and likely litigated process.  In the meantime, we are encouraged that Congress is devoting time and attention to NSR reform as evidenced by the hearing.  Since Congress developed the laws that serve as the backbone of the Clean Air Act, they can pass legislation that can help to streamline the NSR process.  There are already two proposed amendments introduced by Congressman Morgan Griffith (VA) addressing routine maintenance and the pollution control project exemption that are still pending.  Whether other legislation will occur or, if it does – when it will occur, is a guess at this point.  Since it’s already February, the eventual legislative outcomes for NSR reform could hinge on the outcome of mid-term elections in November.  Stay tuned for details as they become available, and feel free to contact me at 908.328.9429 or at cmccall@all4inc.com with questions or comments.