New Source Review Project Emissions Accounting Guidance Memorandum

On March 13, 2018 the U.S. EPA issued a much-anticipated policy guidance memorandum titled “Project Emissions Accounting Under the New Source Review (NSR) Preconstruction Permitting Program”.  The policy guidance is extremely important because it changes a 2006 U.S. EPA policy of only accounting for emissions increases during “step one” of an NSR applicability evaluation.  The new policy, supported by the “plain language” of the Clean Air Act (CAA), allows facilities to now account for emissions decreases that are associated with a given project during step one of the analysis.  The result of the policy change is that the “real world” emissions impacts of projects will be represented in step one of an NSR applicability evaluation, which can impact the outcome of the analysis and ease the regulatory burden associated with such projects.  This is the third policy guidance memorandum issued by U.S. EPA over the past four months that addresses streamlining of the regulatory process.  ALL4 has summarized the two recent U.S. EPA policy guidance memoranda addressing the “U.S. EPA Clarifies NSR Emissions Projections and its Role in the Review Process” and “Once In, Always In” policies.

Background

The NSR regulations include both the prevention of significant deterioration (PSD) regulations and the nonattainment new source review (NNSR) regulations.  PSD applies to new major sources and to major modifications at existing major stationary sources for pollutants where the source is located in an area that is in attainment or unclassifiable with a national ambient air quality standard (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.  NSR applicability analyses are triggered as a result of “any physical change in or change in the method of operation”.  The NSR applicability analysis, required under both PSD and NNSR, is a two-step process that is used to determine whether a project will result in a “significant emissions increase” (step one) and a significant net emissions increase (step two).  Significant levels of pollutant increases in tons per year are defined within the referenced rules.  A project is a “major modification” if it results in both a significant emissions increase and a significant net emissions increase for one or more regulated NSR pollutants.

Previous Policy

Under the previous policy, decreases in emissions associated with a given project (i.e. negative emissions) were “set” to zero during step one of the NSR applicability evaluation thereby discounting such decreases during step one.  The step one emissions increases were compared to the applicable NSR significant emissions increase thresholds to determine whether netting (step two) is required.  In step two, decreases in emissions associated with a project are accounted for, along with other side-wide contemporaneous emissions increases and decreases, and all emissions decreases  must be “creditable or enforceable as a practical matter”, thereby complicating the analysis.  The previous policy prohibited facilities from considering emissions decreases across emissions units within the project during step one and the term “project netting” was coined to reflect the prohibited practice.  By not allowing real emissions reductions to be considered during step one, even projects that reduced actual emissions overall were more likely to trigger the complicated step two netting process, thereby pulling other historic and unrelated projects into the evaluation.

March 13, 2018 Policy

The March 13, 2018 policy clarifies that a facility can consider emissions increases and decreases from the project itself at step one of the NSR applicability process, provided that they are part of a single project.  A common scenario impacted by this is the replacement of an emissions unit (e.g., installation of a new, higher capacity boiler).  Under the new policy, the emissions decreases from the boiler being replaced can be subtracted from the potential to emit (PTE) of the new boiler being installed, thereby increasing the likelihood that the calculated step one emissions changes would not exceed NSR significant emissions increase thresholds.  Under the previous policy, only the PTE of new boiler could be considered under step one, greatly increasing the likelihood that step two netting would be required and allowing for other unrelated emissions increases to be pulled into the evaluation, possibly changing the NSR outcome when compared to the new policy.

Another key aspect of the March 13, 2018 policy is the allowance that emissions decreases that are part of the project and included in the step one evaluation do not need to be federally enforceable.  That is, emissions decreases can now be reflected in the sum of the projected actual emissions associated with a modification project. Only those emissions decreases that are evaluated under step two netting must be enforceable under the new guidance.  This is a significant shift that could change permitting strategies for modification projects that involve modified and affected emissions units, because real emissions decreases that were previously ignored in the evaluation could be utilized to evaluate NSR applicability. There is a lot to unpack with this aspect of the guidance and we plan on providing additional information as we evaluate the implications.

The revised policy is sure to have an impact on how NSR applicability analyses are conducted.  This is a revision in U.S. EPA policy and is not a change to the NSR regulations.  The guidance applies to Federal NSR regulations.  If your state agency has its own NSR regulations, plan to consult with them prior to finalizing air quality permitting approaches that involves U.S. EPA’s new guidance.  If you have any questions or are curious about how the revised policy could impact an upcoming project, please reach out to me at 610.933.5246 x121 or nleone@all4inc.com.