New life for new source review

The Obama Administration is beyond its 100th day, but still busy on the environmental front undoing the work of its predecessor. One thing that means at EPA is breathing life back into the Clean Air Act’s New Source Review program, which the Bush Administration had been busily trying to write out of existence. In the latest development on this front Lisa Jackson, Administrator of Obama’s EPA, has agreed to review three controversial NSR regulations.

NSR requires regulatory review before new pollution sources are created or existing ones expanded. The purpose of that review is to ensure that newly constructed facilities install state-of-the-art pollution controls, and that when existing facilities are updated or expanded they also bring their pollution control equipment up to modern standards. Although it has been criticized as inhibiting modernization, NSR is a crucial aspect of bringing old plants up to modern technological standards over time. (For a helpful analysis of the effect of NSR on air quality, see Jonathan Remy Nash and Richard L. Revesz, Grandfathering and Environmental Regulation: The Law and Economics of New Source Review, 101 Northwestern University Law Review 1677 (2007).)

The Bush Administration was openly hostile to NSR, especially as applied to updated (as opposed to entirely new) facilities. When Bush took office, the Clinton Administration had just launched a long-needed initiative to actually enforce NSR provisions as plants modernized. Prodded by its friends in the energy industry, the Bush EPA issued a suite of rules designed to limit the application of NSR. Eric Schaeffer, then director of EPA’s Office of Regulatory Enforcement, resigned in frustration that the administration was essentially pulling the rug from under his efforts. EPA administrator Christine Todd Whitman followed Schaeffer out the door when she could not persuade the White House to back down.

The worst of the changes in that rulemaking, a provision exempting any modification that cost less than 20% of the replacement value of the modified unit, was struck down in New York v. United States, 443 F.3d 880 (D.C. Cir. 2006). Still determined to undermine NSR, the Bush administration issued a flurry of new rules limiting the program’s application from late 2007 until just before it left office in 2009.

In this latest action, responding to petitions submitted by environmental groups and the state of New Jersey, EPA has agreed to reconsider three aspects of the late Bush NSR rules. The first authorized some sources not to keep records of  how they determined that a modification would not increase emissions, and therefore did not require NSR permitting; the second limited the extent to which “fugitive emissions” from leaks and other non-smokestack sources count in determining whether a change increases emissions; and the third allowed the use of large particulate matter emissions as a surrogate for small particulate matter in some circumstances. In each case, EPA has agreed to take additional public comment and to review the prior decisions. With respect to particulate emissions, EPA has already signaled that it plans to undo at least one part of the Bush rule.

The issues raised in these petitions for reconsideration are among the most arcane details of Clean Air Act practice, usually of interest only to specialists in the area. What’s important in this case is the overall pattern of EPA action on NSR since Obama’s inauguration. Jackson has already stayed implementation of a last-minute Bush rule allowing sources to disaggregate modifications to minimize the likelihood that NSR would kick in and, in cooperation with the Department of Justice, launched a new initiative to enforce NSR requirements.

NSR, it would appear, has been revived after being left for dead in the last administration.

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Reader Comments

One Reply to “New life for new source review”

  1. Essentially all the changes made to the Major NSR rules during the Bush administration were extremely controversial and perceived by the environmental groups and State/Local agencies as ‘relaxation.’ It’s no surprise that EPA under the Obama administration has moved quickly to reconsider every rulemaking that it legally could.

    As a result, EPA has plans to reconsider portions of three rules under its New Source Review (NSR) permitting program. The rules under review determine when and how facilities are required to
    1. Account for air emissions that are not released through a stack, vent, or other confined air stream (fugitive emissions rule);
    2. Keep records on emissions (reasonable possibility rule); and
    3. Account for air emissions associated with fine particle pollution when obtaining a permit (PM2.5 rule).

    The rules may become more stringent. In some cases ‘more stringent’ may mean returning the rule to the interpretation or language it had prior to 2002. There are several other quirks to the rule changes as well. The fugitive emissions rule, for example, is currently the same as it was interpreted prior to 1989 when EPA issued the interpretive ruling): fugitive emissions are counted towards applicability of major modification only if the source belongs to one of 28+ listed source categories. The Bush administration’s 12/31/02 “Reform Rule”, which went into effect in 2003, codified the 1989 policy regarding the way fugitive emissions are treated, requiring that fugitive emissions be counted for applicability of major modification for all source categories.

    On 12/19/08, EPA changed its position in response to a petition for reconsideration and reverted to including fugitive emissions only for the 28+ listed source categories. Now EPA is reconsidering the 12/19/08 rule and may revert to including fugitive emissions for all source categories for major modification applicability determination.

    The ‘reasonable possibility’ rule is another example. The 12/31/02 Reform Rule transformed the default calculation for emissions increases due to modifications (from a very controversial “pre-change actual to post-change potential emissions” calculation [per EPA policy] to a “baseline actual to projected actual” calculation). The latter calculation (upheld by courts in 1992 and 2005) is actually the most reasonable and realistic calculation to use for all modifications except those that so change the unit that future emissions cannot reasonably be predicted by historic emissions. The Reform Rule requires sources to keep records of emissions and the calculations and submit reports only if there is a ‘reasonable possibility’ that the emissions increase may be ‘significant’ (which would make the modification major). However the phrase ‘Reasonable possibility’ was not defined and the DC Circuit Court of Appeals remanded it to EPA. Thereafter EPA on 12/21/07 promulgated ‘reasonable possibility’ criteria that provided certainty but was extremely controversial and is being reconsidered.

    Finally, the PM2.5 Rule controversy appears to center on the delay in requiring that condensable emissions be included as PM2.5 emissions and in the continued use of PM10 analyses as surrogates for PM2.5 in attainment and unclassifiable areas subject to the Prevention of Significant Deterioration (PSD) program. These delays are viewed by many as unnecessary, but there is very little data on condensable emissions (EPA only recently [3/25/09] proposed a measurement method) and there are as yet no threshold levels set by EPA for PM2.5 significant impacts, increments, and monitoring [all of which are essential for PSD impact analyses]).

    The greatest effect on businesses is the uncertainty, which affects not only the cost of any project but also the ability to obtain permits (vulnerability to challenges from environmental groups) and funding. Of course, there is also uncertainty even if EPA wasn’t reconsidering these rules. A few examples:
    1. Even though EPA’s position currently is to not include condensable emissions in determining PM2.5 emissions, many States likely will still require (or be pressured into) including them despite the lack of data and a reference test method.
    2. Sources don’t know whether to follow the reasonable possibility rule if EPA is considering reversing it. Would they be in violation if the rule is reversed? In addition, the reporting requirements tied into recordkeeping could dramatically increase the number of alleged violations if the rule is reversed.
    3. Finally, if a source doesn’t count fugitive emissions based on the rule and the modification is minor, what happens if the rule is reversed? Are they in violation if the inclusion if fugitive emissions would have made the modification major?

    Other than the fact that EPA is also reconsidering the Johnson memorandum (which stated that EPA policy was that pollutants subject to monitoring and reporting requirements only are not regulated NSR pollutants), the NSR considerations have nothing to do with the greenhouse gas regulations that are on the horizon. However, EPA’s reconsideration of whether and how GHG should be regulated is certainly a part of the overall EPA reconsideration of all Bush administration NSR-related actions.

    We already have an Environmental Appeals Board (EAB) decision on Deseret that mandates a BACT review of CO2, so it seems pretty obvious that (combined with the Sierra Club’s declared intent to challenge all traditional coal power plant permits) has created a huge problem for developers and investors in the power industry.

    One thing is certain: NSR in its current form (the thresholds and requirements) is ill-suited for GHG. NSR is intended for pollutants with local effects. For pollutants with broad effects, such as acid rain and stratospheric ozone depleting substances, NSR is ineffective. In fact, requiring permits for all new sources greater than 100 or 250 tpy (the NSR thresholds) would increase the number of permits by a factor of 10 or more and completely overwhelm the permitting process nationwide, delaying all permits.
    This material was taken from an interview with NSR expert Gary McCutchen at

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About Holly

Holly Doremus is the James H. House and Hiram H. Hurd Professor of Environmental Regulation at UC Berkeley. Doremus brings a strong background in life sciences and a comm…

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About Holly

Holly Doremus is the James H. House and Hiram H. Hurd Professor of Environmental Regulation at UC Berkeley. Doremus brings a strong background in life sciences and a comm…

READ more