Clean Air Act New Source Review in 2018: Re-thinking Your Strategy for Compliance

New Source Review (“NSR”) remains a focus of enforcement for EPA.  Between last year and now, EPA finalized eight settlements with manufacturers and one with a utility, asserting NSR violations for allegedly not obtaining a pre-construction permit before making physical or operational changes to the plant.  The industries covered by the settlements were petroleum, carbon black, and glass manufacturing.

Guidance issued by EPA in December, 2017 addressed the Trump Administration’s approach on NSR enforcement and provided industry with a clear roadmap (the “December Guidance”).  The December Guidance said that EPA will not second-guess actual-to-projected-actual emissions analyses for projects unless there is “clear error.”  Instead, the enforcement focus will be on emissions during the five or ten-year recordkeeping or reporting period after the project is completed.

The most recent guidance issued by EPA addresses how a source conducts an emissions analysis (the “March Guidance”).  The March Guidance departs from previous EPA decisions by allowing a project’s emissions decreases to be credited against emission increases in the first step of the NSR analysis.  If the project’s overall emissions profile is not over PSD significance thresholds, then netting is not required.  The March Guidance simplifies the complexities of the NSR analysis and is expected to reduce the length of the permitting process.

EPA’s shift in NSR enforcement focus is instructive in three ways when considering your NSR litigation risk-avoidance and plant project strategy this year:

• When in doubt, do an emissions analysis.  The December Guidance means EPA will give your facility deference as long as the facility documents that it examined the project in a way that is consistent with the NSR regulations.  EPA has signaled that it is not in the business of agreeing or disagreeing with judgment calls on emission factors, capacity factors, and exceptions (e.g., routineness) used in the emissions analysis. 
• Consider tracking and analyzing post-project emissions of your facility.  EPA has stated that it plans to evaluate NSR enforcement opportunities on the basis of actual emissions.  Companies must submit emissions data to EPA to comply with various other Clean Air Act programs.  Companies would be well-served to determine if emissions are trending upwards on an annual basis, such that enforcement risk might increase.  If an analysis identifies an upward emissions trend, the reasons for that trend should be examined and documented.  Many other variables exist that could influence emissions that are not related to a plant improvement. 
• Consider doing plant efficiency improvements.  Emission reductions can be credited against increases, simplifying the permitting process. 

Companies enthusiastic about the December and March Guidance documents should be wary because the favorable policies they established can be reversed just as easily as the Trump EPA put them in place.  For example, a new President in 2020 can revert back to the Obama Administration’s policy of pursuing enforcement without waiting for five or ten years of emissions after the project.  With respect to the December Guidance, companies should be mindful of environmental groups, which still pursue alleged NSR violations through citizen suits and Title V permit objections.  Companies should continue to ensure that actual-to-projected-actual analyses contain accurate, defensible emissions estimates as prescribed by 40 CFR § 52.21.

Another variable is NSR reform.  EPA has identified NSR reform as a priority and has created a task force to review reform opportunities.  Meanwhile, Congressman Griffith from Virginia introduced H.R. 3128 on June 29, 2017 to make changes to NSR regulations.  H.R. 3128 proposes to define that a “modification” to a unit for NSR purposes would be based on the much less stringent hourly emissions rate test rather than the actual-to-projected-actual test required by 40 CFR § 52.21.  The bill is presently in the Committee on Energy and Commerce.  That Committee held a hearing on February 14, 2018 to start the NSR reform discussion.  Prominent speakers for industry, states, and environmental groups spoke to Committee members concerning the general concept of NSR reform, including whether it is advisable, the utility of the NSR program generally, and specific ideas for improvements.  It is unclear whether reform efforts will be successful.  We will be monitoring progress and gauging the impact of these reform efforts on facility compliance. 

“New Source Review Preconstruction Permitting Requirements:  Enforceability and Use of the Actual-to-Projected-Actual Test in Determining Major Modification Applicability” (Memo from Scott Pruitt, December 7, 2017).

“Pruitt signals 'task force' could inform NSR reform push,” (Inside EPA, September 21, 2017).

February 14, 2018 Hearing on “New Source Review Permitting Challenges for Manufacturing and Infrastructure” at https://energycommerce.house.gov/hearings/new-source-review-permitting-challenges-manufacturing-infrastructure/

“Project Emissions Accounting Under the New Source Review Preconstruction Permitting Program” (Memo from Scott Pruitt, March 13, 2018).