New Source Review

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Under the Clean Air Act, a facility that emits air pollutants may not be constructed unless an air permit has been issued to the facility.  For decades, EPA has interpreted the statute to prohibit almost any construction or modification activities until a permitting authority issues a final permit.  But on March 25, 2020, EPA proposed new guidance to clarify that, according regulations adopted 40 years ago, the only construction prohibited prior to issuance of an air permit is construction on the emitting unit itself.

EPA’s New Source Review (NSR) reform efforts have been in full swing over the past month or so as the Agency released two final guidance documents, issued a pre-publication version of a proposed rule, took final action to end a years-old reconsideration of a 2007 rulemaking, and released its Fall Unified Agenda detailing dates for a number of upcoming NSR-related actions. While these actions may not have immediate consequences for many regulated sources, they are evidence that EPA continues to pursue its NSR reform agenda. 

Under the Obama Administration, EPA issued rules for new sources in the oil and gas sector, both to expand the kinds of sources covered and to begin regulating a new pollutant—methane.  Although those rules were not expected to achieve significant new reductions in emissions, they triggered a requirement for EPA to expand its methane regulations further to existing sources.

EPA published a proposed rule in the Federal Register on August 9, 2019 that addresses how facilities undertaking a project involving multiple air emission units are to account for emission increases and decreases associated with the project. The proposed rule incorporates an interpretation of EPA’s New Source Review (NSR) regulations originally advanced in a March 2018 guidance document from Administrator Scott Pruitt entitled “Project Emissions Accounting Under the New Source Review Preconstruction Permitting Program.”

NSR—the program imposing onerous permitting requirements on the construction of new sources and “major modification” projects at existing sources—requires industrial sources of air emissions to determine whether the projects they propose will increase those emissions.  EPA adopted regulations in 2002 to provide a new structure for those critical emission calculations, which specifies that sources must calculate the “sum of the differences” between a baseline and a future projection for each existing emission unit.  That language is particularly important for individual projects that may cause emissions to go down at one unit but up at another.

On February 14, 2018, the House Committee on Energy and Commerce held a hearing on the Environmental Protection Agency’s (“EPA”) New Source Review (“NSR”) permitting program as an initial step towards NSR reform.  See https://energycommerce.house.gov/hearings/new-source-review-permitting-challenges-manufacturing-infrastructure/.  Six witnesses presented testimony at the hearing, with four in favor of and two…

On December 7, 2017, EPA Administrator Scott Pruitt issued a memorandum explaining EPA’s future approach concerning enforcement of the New Source review program, considering the uncertainty created by the Sixth Circuit’s decisions in the DTE NSR cases (U.S. v. DTE Energy Co., 711 F.3d 643 (6th Cir. 2013) and U.S. v. DTE, 845 F.3d 735 (6th Cir. 2017)). NSR requires new major sources and major modifications at existing sources to obtain a permit before construction commences. In determining whether a permit is needed for a major modification, owners or operators are required to conduct a pre-construction applicability analysis to determine whether the proposed project would cause a significant emission increase, calculated using the actual-to-projected-actual applicability test that compares past actual emissions to future projected emissions. The memorandum’s main focus is on circumstances where sources have used that test in determining NSR applicability and the pre- and post-project source obligations.

In an October 16, 2017 order signed by EPA Administrator Scott Pruitt, EPA reversed a position it has held for many years — that the Agency has authority, in the context of Title V permitting, to review previous state-level decisions on the applicability of new source permitting requirements.  The new policy outlined in the October 16 order removes the Title V petition to object as an avenue for citizens to seek EPA review of state preconstruction permitting decisions.

The federal appellate court hearing the appeal of EPA’s “Section 111(b)” regulations establishing a carbon capture and storage “new source performance standard” for new coal-fueled electric generating stations has today suspended the April 17, 2017 date for oral argument in the case.  The U.S. Court of Appeals for the D.C.…

Last month, the U.S. Court of Appeals for the Sixth Circuit reinstated an Environmental Protection Agency (EPA) enforcement action against DTE Energy (DTE) for violating the New Source Review (NSR) program under the Clean Air Act.  This case stems from capital projects undertaken at DTE’s Monroe Power Plant in Monroe, Michigan during a three-month scheduled outage in 2010.  DTE had characterized the projects performed during the 2010 outage as routine maintenance, repair and replacement activities, which, if accurate, would exempt them from NSR.