Prevention of Significant Deterioration (PSD) & the Major Modification
Posted: November 4th, 2013Authors: Roy R.
The implementation at the state level of the major New Source Review (NSR) rules that include both prevention of significant deterioration (PSD) and nonattainment new source review (NNSR) have evolved over a long period of time. During the last decade that evolution has been substantially impacted by the “NSR Reform” revisions of 2002; the regulation of particulate matter less than 10 microns (PM10) and particulate matter less than 2.5 microns (PM2.5); and the seemingly routine changes in form and reductions of national ambient air quality standards (NAAQS) following required reviews. Historically “process” changes in the NSR program were documented via guidance memoranda, policy statements, and precedence made publicly available on the U.S. EPA NSR guidance database. However, formal U.S. EPA guidance related to NSR virtually disappeared since the promulgation of the NSR Reforms of 2002 and has really only appeared again in rare instances as a result of specific permit reviews and/or court decisions. This 4 The Record article is the first in a series of articles related to the NSR regulations that have been promulgated under Section 110 of the Clean Air Act (CAA) and addresses the dreaded PSD major modification.
For almost 30 years now, the term “major modification” has struck fear into the hearts of environmental managers associated with facilities that are classified as “major stationary sources” under the NSR regulations. In many instances, such fear is valid because the air permitting path associated with major modifications can be sufficiently complicated and fraught with uncertainty that the very viability of a given project could be threatened. In this article, ALL4 provides a brief overview of the NSR regulations and describes what a major modification actually is under the PSD regulations.
The NSR regulations include both the PSD regulations and the NNSR regulations. PSD applies to new major sources and to major modifications at existing major stationary sources for pollutants where the area the source is located is in attainment or unclassifiable with the NAAQS. NNSR applies to new major sources and to major modifications at existing major stationary sources for a pollutant where the area the source is located is classified as non-attainment with the NAAQS. Health-based NAAQS currently exist for nitrogen dioxide (NO2), sulfur dioxide (SO2), PM10, PM2.5, carbon monoxide (CO), ozone (O3), and lead (Pb). The NAAQS serve as the “backbone” to the NSR regulations and to state implementation plans (SIPs). The NSR regulations were established to ensure that the NAAQS are attained and maintained even as emissions sources change and facility expansion projects are implemented.
What is a Major Modification?
Major modification is generically defined as “any physical change in or change in the method of operation of a major stationary source that would result in: a significant emissions increase of a regulated NSR pollutant and a significant net emissions increase of that pollutant from the major stationary source” under both programs. The complete definition can be found at 40 CFR §52.21(b)(2). A closer look at the above definition of major modification reveals four key terms that represent the most basic components of the NSR rules. Let’s have a look at each:
What is a Major Stationary Source?
The complete definition of major stationary source can be found at 40 CFR §52.21(b)(1). There is a list of 26 specific facility types that are considered major stationary sources if their potential to emit (PTE) any regulated NSR pollutant is 100 tons per year (or more). For such sources, fugitive emissions must be included when determining PTE. Examples include pulp mills, Portland cement plants, and large fossil fuel fired boilers. For all other source types not included in the list of 26, a PTE of 250 tons per year (excluding fugitive emissions) of any regulated NSR pollutant will classify them as a major stationary source.
Any Physical Change in or Change in the Method of Operation
It is interesting that this phrase is undefined in the rule. Even more interesting is that the rule defines activities or actions that are not physical changes or changes in the method of operation, including routine maintenance, repair and replacement; increases in operating hours or production rate (so long as such increases are not prohibited by a permit condition); changes in ownership; and several other criteria with limited applicability. It is clear that that this phrase is intended to be broadly applicable thereby necessitating a thorough evaluation of each facility project, from both an operational and a capital expenditure perspective. The demise of several proposed regulatory changes that might have helped clarify certain aspects of what does and does not constitute a modification such as the “Equipment Replacement Provision (ERP)” exclusion and the “Pollution Control Project (PCP)” exclusion can be attributed to the use of the word “any” within the physical change or change in the method of operation language in the rule. In essence according to the DC Circuit Court, ANY means ANY, with no exceptions. With this in mind, many facilities that are subject to Boiler MACT are now discovering that boiler modifications, intended to reduce emissions to comply with Boiler MACT, represent physical changes or changes in the method of operation” necessitating an evaluation of major NSR applicability. Major sources must also be aware that with respect to the possibility of making changes under the routine maintenance repair and replacement provision, there is actually a rigorous evaluation protocol that U.S. EPA uses to determine whether the activity associated with routine maintenance, repair, or replacement is actually “routine” for a given process or industry.
Regulated NSR Pollutant
The complete definition of regulated NSR pollutant can be found at 40 CFR §52.21(b)(50). In general, a regulated NSR pollutant is any pollutant for which a NAAQS has been promulgated (i.e., NO2, SO2, PM10, PM2.5, CO, and Pb). Because ozone is formed in the atmosphere, precursors to ozone formation (i.e., volatile organic compounds (VOC) and nitrogen oxides (NOX)) are regulated in lieu of ozone. In addition, precursors to the formation of PM2.5 (i.e., SO2 and NOX) are also regulated. The definition also defines condensable PM and includes condensable PM as part of PM10 and PM2.5 emissions. A new twist in determining NSR applicability became reality as a result of the greenhouse gas (GHG) Tailoring Rule. A provision in the definition of regulated NSR pollutant incorporates pollutants that are “subject to regulation” as defined in 40 CFR §52.21(b)(49) as regulated NSR pollutants. 40 CFR §52.21(b)(49) articulates when and how GHG emissions become subject regulation. In general, if a facility exhibits a GHG PTE of 100,000 tons of carbon dioxide equivalent (CO2e) and the GHG emissions increase for a given project is 75,000 tons of CO2e, GHG emissions are subject to regulation and become a regulated NSR pollutant.
Significant Emissions Increase
The complete definition of significant emissions increase can be found at 40 CFR §52.21(b)(40) and states that a significant emissions increase is “… an increase in emissions that is significant (as defined in paragraph (b)(23) of this section) for that pollutant.” So what exactly does that mean? 40 CFR §52.21 (b)(23) specifies the mass of emissions increase that is significant for each regulated NSR pollutant. For NOX, SO2, and VOC the significance level is 40 tons per year. For PM10, the significance level is 15 tons per year. For PM2.5, 10 tons per year, for CO, 100 tons per year, and for Pb, 0.6 tons per year. Several other pollutants that are regulated under Section 111 of the CAA have significance levels as well including the following; fluorides (3 tons per year), sulfuric acid mist (7 tons per year), hydrogen sulfide (10 tons per year), total reduced sulfur (10 tons per year), and reduced sulfur compounds (10 tons per year). GHG emissions are conspicuously absent from the list of pollutants with corresponding significance levels. However, U.S. EPA has addressed this by including a provision that identifies any emissions increase as significant for a regulated NSR pollutant that is not listed (i.e., individual GHG pollutants). The determination of whether the emissions increases associated with a project are significant is often referred to as Step 1 in the PSD applicability determination process. Of paramount importance in Step 1 is how an actual project is defined (e.g., new, modified, and affected emissions units) because emissions increases must be determined for each type of unit. Note importantly that decreases in emissions are not counted in Step 1. If the emissions increases associated with the project are significant in Step 1, it does not necessarily mean that the project is a major modification. However, it does mean that a netting analysis (Step 2) in the evaluation process will be required to determine if there will be a net emissions increase.
Net Emissions Increase
The complete definition of net emissions increase can be found at 40 CFR §52.21(b)(3). Determining whether a net emissions increase will occur as a result of a project is (i.e., netting analysis or step 2) significantly broadens the scope of the major modification evaluation because significant emission increases of regulated NSR pollutants (determined during step 1) for the project are summed with increases and decreases of regulated NSR pollutant emissions that occurred during a contemporaneous period across the entire stationary source. The contemporaneous period begins the date five (5) years before construction on the particular change commences and ends on the date that the increase from the particular change occurs. There are various rules that apply to the step 2 process. However, the two (2) most important rules specify that contemporaneous emissions increases represent increases in potential emissions and that contemporaneous emissions decreases represent decreases in actual emissions, that are made enforceable. If, after step 2, the increase in a regulated NSR pollutant exceeds a specific significance level for a pollutant, a major modification for that pollutant occurs, thereby triggering PSD applicability.
So now that we have a better understanding of what a major modification is, the next question is how one makes such a determination with regard to a project. There are actually several tests defined within the PSD rules that specify how such determinations are made including the “actual-to-potential” test for new emissions units, the “actual-to-projected-future-actual” test for modified and affected emissions units, and the “hybrid test” for projects involving new, modified, and affected emissions units. The various tests require the calculation of baseline actual emissions (BAE), projected actual emissions (PAE), and excludable emissions for modified and affected emissions units and the calculation of the potential to emit (PTE) for new emissions units. The results of the various tests are used to compare to the significance levels during steps 1 and 2 to determine whether a major modification will occur. A more detailed analysis of the various tests and the required calculations will be the subject of a future 4 The Record article in the NSR series.
A key take away from this article is understanding that at an existing major stationary source, “any physical change in or change in the method of operation” triggers the need to determine whether a major modification will result. “Any physical change” can include actions taken to reduce emissions (e.g., new air pollution control equipment in response to a MACT standard) and fuel changes (e.g., conversion of an oil fired boiler to a natural gas fired boiler) as well as more typical actions taken to improve efficiency and productivity, or to increase production. Such applicability assessments may or may not result in a determination that the project is a major modification subject to NSR permitting. Regardless of the outcome of the NSR applicability assessment, the savvy facility environmental manager will want the results on file.