Texas Rule Changes to Incorporate Project Emissions Accounting for Air Permitting

On June 11, 2021, the Texas Commission on Environmental Quality (TCEQ) approved the long-awaited changes to 30 TAC §116 regarding project emissions accounting (PEA).  The newly approved changes will become effective on July 1, 2021.  Per an interoffice memorandum dated May 21, 2021 from the TCEQ, the purpose of these changes is to “align rules relating to Prevention of Significant Deterioration (PSD) and Nonattainment NSR (NNSR) applicability with recent guidance and rules issued by the United States Environmental Protection Agency (U.S. EPA), comply with congressional intent for the federal PSD and NNSR programs, and encourage emissions decreases that might not otherwise occur or would be delayed.”

This change will have a noticeable impact for air permitting in Texas, especially for those projects that could potentially trigger PSD or NNSR review without PEA.

Background

Before March 2018, when conducting an air permitting evaluation for a PSD or NNSR project, the first step (Step 1) was to evaluate emissions increases associated with the project without considering any emissions decreases.  This increase was compared to certain thresholds depending on the project type (30 TAC §116.150 and §116.160).  If the project did not cause a significant emissions increase in Step 1, no PSD review or NNSR was triggered.  The analysis was complete.  If the project did not pass Step 1, further analysis (Step 2) was required.

On March 13, 2018, the U.S. EPA published a guidance memorandum titled “Project Emissions Accounting under the New Source Review Preconstruction Permitting Program.”  In that memo, the U.S. EPA introduced the PEA concept and allowed emission decreases associated with a project to be considered as part of the Step 1 evaluation together with the project emission increases.

Subsequently, the U.S. EPA proposed rule changes on August 9, 2019 (84 Federal Register 39244).  On November 24, 2020, the final rules were adopted and published (85 Federal Register 74890).

Meanwhile, the TCEQ was closely following the changes and noted the discrepancies between U.S. EPA and 30 TAC regulations.  On March 25, 2020, the TCEQ approved a petition submitted by Baker Botts, L.L.P., which would make changes to 30 TAC §116 so that the regulations would align with the changes made by the U.S. EPA.  As mentioned above, newly changed 30 TAC §116 rules will become effective on July 1, 2021.  To be more specific, the new rules will amend several subchapters and repeal some subchapters of 30 TAC §116.

Impacts

By aligning the 30 TAC §116 rules with the U.S. EPA’s regulations, the air permitting process will be clear and consistent.  At a high level, the regulated community will not be adversely affected.  The single most important impact of the change is that emissions decreases for a project can be used in Step 1 calculations together with emissions increases for both PSD and NNSR applications.  This increased flexibility will improve the probability that a project does not have a significant emissions increase at Step 1 and avoid further analysis that might lead to PSD or NNSR review or a more complicated permit application that involves a detailed netting exercise.  In addition, it provides incentives for an applicant to consider using pollutant abatement devices or pollution prevention approaches in a project in order to pass Step 1.

Complications

Currently, legal challenges have been filed on U.S. EPA’s final rule adopting the changes to the PSD and NNSR program.  Additionally, President Biden’s Executive Order 13990 directs all federal agencies, including U.S. EPA, to immediately review all regulations and other actions taken between January 20, 2017, and January 20, 2021, to determine if they conflict with federal objectives to protect public health and the environment.  Therefore, there is a possibility that these changes will be reversed in the future.  If this does happen, it could create permitting difficulties such as delays and even financial burden for any sites in Texas that have submitted air permit applications that rely on PEA but have not yet received a permit.

Conclusions

The adoption of the PEA concept in 30 TAC §116 is welcome news for the regulated community.  It will make the air permitting process easier for projects that could otherwise have triggered PSD review or NNSR.  However, these rules may change again depending on actions at the federal level.

This blog has provided a high-level summary of PEA.  If you have any further questions regarding this topic or would like assistance reviewing your project to determine the appropriate air permitting mechanism, please contact us.