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New Source Review: Proposed Project Emissions Accounting Rule

Posted: October 29th, 2019

Authors: Michael M. 

The United States Environmental Protection Agency (U.S. EPA) proposed a rulemaking on August 9, 2019 that would revise the New Source Review (NSR) regulations to clarify that both emissions increases and decreases should be considered in Step 1 of the NSR major modification applicability test.  The proposed revision reflects findings presented in the March 13, 2018 U.S. EPA memorandum “Project Emissions Accounting Under the New Source Review Preconstruction Permitting Program” (March 2018 Memo).  The 60-day comment period for the proposal ended on October 8, 2019.


The Federal NSR regulations require that stationary sources of air pollution obtain a preconstruction permit prior to beginning construction of a new major source or a major modification of an existing major stationary source.  The NSR regulations include provisions for prevention of significant deterioration (PSD) and non-attainment new source review (NNSR).  The implementing requirements of the major NSR regulations are found at 40 CFR §51.166 and §51.165.  States may have U.S. EPA-approved State Implementation Plans (SIPs) in place to implement the PSD and NNSR preconstruction permit programs.

Prior to the 2002 NSR Reform Rule, NSR applicability was based on the “actual to potential” test which compared the baseline actual emissions (BAE) of a project with post-project potential to emit (PTE). The 2002 NSR Reform Rule revised the applicability provisions of the rule to codify the two-step applicability procedure and to allow a comparison of BAE to projected actual emissions (PAE) for projects involving existing emissions units to determine NSR applicability.  Due to regulatory uncertainty regarding whether project emissions decreases could be accounted for during Step 1 when determining NSR applicability, U.S. EPA issued a proposed rule in 2006 titled Prevention of Significant Deterioration and Nonattainment New Source Review: Debottlenecking, Aggregation and Project Netting’’ (2006 Project Netting Proposal)  to clarify the regulatory language.  The 2006 Project Netting Proposal included language to clarify that “…both emissions increases and decreases that occur within the scope of a project be counted in Step 1 of the major modification applicability test for all project categories.”  After three years, the U.S. EPA announced in 2009 that it was taking no action on the 2006 Project Netting Proposal. With the publication of the August 9, 2019 proposed rule, U.S. EPA is seeking to clarify the NSR applicability process.

NSR Applicability

Determining NSR applicability involves a two-step test.  The first step requires a source owner or operator to determine whether a project results a “significant emissions increase” of a regulated NSR pollutant (Step 1).  If the proposed project results in a significant emissions increase, a source owner or operation must then perform a contemporaneous netting analysis (Step 2) to determine whether there is a “significant net emissions increase” of that pollutant.  If a project will result both in a significant emissions increase and a significant net emissions increase, the project would trigger PSD requirements (e.g., Best Available Control Technology (BACT) and air quality modeling) and/or NNSR requirements (e.g., Lowest Achievable Emissions Rate (LAER) control technology and emissions offsets).

Project Emissions Accounting

U.S. EPA issued the March 2018 Memo to clarify their EPA interpretation of how to account for emissions decreases during Step 1 of the NSR applicability procedure.  The March 2018 Memo articulated regulatory interpretations reflecting “…a reconsideration of some previous conclusions and an examination of the regulations as a whole…” regarding the two-step NSR applicability process.   The primary issue of interpretation was related to whether project emissions decreases, as well as emissions increases, could be accounted for in Step 1 of the two-step process.   Prior to the March 2018 Memo, Step 1 of the applicability analysis only included emissions increases associated with the project.  Project emissions decreases could not be considered until the Step 2 netting analysis.  The critical difference between Step 1 and Step 2 is that Step 2 includes both emissions decreases and increases during the five-year contemporaneous period.  Therefore, project emissions decreases could be nullified by a previous project that involved emissions increases during Step 2 under the current regulatory language which could result in a major modification triggering major NSR requirements.

In the March 2018 Memorandum, U.S. EPA explained that it interpreted the current NSR regulation to allow for emissions decreases to be considered in Step 1 of NSR applicability analyses.  The August 2019 proposed rule aims to fully clarify the language found at 40 CFR §52.21(a)(2)(iv)(f) to reflect the approach identified in the March 2018 Memorandum.  Specifically, U.S. EPA is proposing to revise the language of 40 CFR §52.21(a)(2)(iv)(f) from “sum of the emissions increase” to “sum of the difference.”  Furthermore, U.S. EPA proposed to add subparagraph §52.21(a)(2)(iv)(g) to define “sum of the difference” as including both increases and decreases in emissions calculated.  U.S EPA is proposing to make the revisions to the PSD regulations noted above in the corresponding NNSR regulations.  The August 2019 proposed rule supersedes the 2006 Project Netting Proposal, which is being withdrawn.

For those who have been working with NSR applicability for more than 20 years, the proposed revisions to the applicability provisions appear to comport with the original intent of the 2002 NSR Reform Rule.  Finally, understand that PSD and NNSR are complex regulatory programs which can be further complicated by nuances in state-specific NSR programs and regulatory language.  Please feel free to reach out to your ALL4 project manager to discuss your facility’s specific needs.  If you have questions, please reach out to me at 610.933.5246 x131 or mmchale@all4inc.com.


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