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12.15.2022 Legal News

EPA Proposed Rule: Fugitive Emissions Count Toward PSD Significant Emissions Increase Thresholds

EPA is proposing revisions to the new source review (“NSR”) permit program (“2022 Proposed Fugitive Emissions Rule”) under the federal Clean Air Act (“CAA”), which will codify the requirement that modifications account for fugitive air emissions when determining the need for an NSR permit due a significant emissions rate (“SER”) increase of certain air pollutants. The public comment period for the rulemaking closed December 13, 2022.       

New Source Review Program

NSR is the federal air permit program reserved for “major sources” of certain regulated air pollutants. (While mandated by the federal CAA, most NSR permits are issued by the states under authority delegated by EPA.) Where an area is in attainment for all applicable national ambient air quality control standards (“NAAQS”), new construction projects are required to obtain a prevention of significant deterioration (“PSD”) permit if the project qualifies as a “major source” emitting 250 tons per year (“TPY”) of designated regulated pollutants; twenty eight listed industrial classifications (like chemical manufacturing, fossil fuel fired electrical plants, and Portland cement facilities) trigger PSD permitting at 100 TPY. New construction in an area not attaining NAAQS levels requires a “nonattainment new source review” (“NNSR”) permit if it has the potential to emit at least 100 TPY.

Regardless of the attainment status, an existing “major source” will trigger PSD or NSR permitting where any physical change or modification will result in a SER increase of sulfur dioxides, carbon monoxide, particulate matter (10 and/or 2.5 microns), nitrogen oxides, volatile organic compounds (“VOCs”), as well as other regulated pollutants. The emissions potential sufficient to be considered “significant” differs depending on the pollutant. For example, the SER for VOC is 40 TPY but only 10 TPY for PM 10. A change resulting in a significant SER increase is considered a “major modification.”

Compliance with requirements for these major source permits can be expensive. PSD sources must install best available control technology (“BACT”) for that type of source (considering energy use, environmental impacts, and costs), while NNSR sources are required to install controls that meet the lowest achievable emissions rate (“LAER”) regardless of cost.                   

2008 Fugitives Emissions Exemption

Under current regulations, fugitive emissions are only counted toward the major source threshold where a new source is planned or an existing major source falls into a set of fugitive heavy emitters. Fugitive emissions are emissions of air pollutants that could not reasonably pass through a stack or vent. In contrast, fugitive emissions have been required for most of the duration of the PSD program to be counted towards the determination of whether a modification was major as result of a SER increase. In 2008, however, EPA adopted a rule that modifications were not required to include fugitive emissions in the SER increase evaluation (“2008 Fugitive Emissions Exemption”). The 2008 Fugitive Emissions Exemption became effective on January 20, 2009, but, due to a series of stays issued by EPA, the Fugitive Emissions Rule only briefly took effect between January 20, 2009, and September 30, 2009. Since late 2009, the regulations that predated the 2008 Fugitive Emissions Rule have been the operative regulations governing the treatment of fugitive emissions in the major modification context.

2022 Proposed Fugitive Emissions Rule

After reevaluating the legal and policy bases of the 2008 Fugitive Emissions Exemption, “EPA no longer considers that rule’s treatment of fugitive emissions in the context of major modifications to be appropriate.” 87 Fed. Reg. at 62327. Therefore, EPA has decided to codify the effect of the stay of the 2008 Exemption and is now proposing all major modifications consider fugitive emissions as part of the SER increase evaluation under the 2022 Proposed Fugitive Emissions Rule.

The approach adopted now by EPA is simply to delete references to the 2008 Fugitive Emissions Exemption throughout the NSR permitting regulations: “The EPA proposes to restore its longest-standing interpretation that CAA section 111(a)(4) requires that all major sources consider increases in all types of emissions (including fugitive emissions) in determining whether a proposed change would constitute a major modification. 87 Fed. Reg. at 62332. The EPA seeks comment on whether this interpretation supports repealing the 2008 Fugitive Emissions Rule, as well as removing the similar ‘‘major solely due to the inclusion of fugitive emissions’’ exemption first established in 1980.” Id.

The EPA preamble provides the policy reasons for the change. First, EPA states “[t]hrough this proposal, the EPA seeks to realign its NSR regulations to better reflect the purpose of the NSR program and to end the regulatory uncertainty that has surrounded the EPA’s treatment of fugitive emissions in the major modification context over the past four decades,” Id. EPA points out in the preamble that the Fugitive Emissions Rule represented a significant shift in the EPA's treatment of fugitive emissions and, as noted, had only been effective for a relatively brief period of time before the rule was stayed and the prior regulatory approach reimplemented.

Second, EPA argues the plain language of the Clean Air Act, legislative history, and case law involving these provisions supports requiring all existing major sources include fugitive emissions when determining whether a modification at the source requires a major PSD or NNSR permit. Id. Caselaw encourages EPA to apply the plain reading of any statute when drafting regulations (including those governing major modifications under the Clean Air Act), the approach in the proposed regulation is consistent with the Agency’s prior plain reading of the statute. In 1984, EPA concluded that “the plain language of the [CAA] strongly suggests that Congress did not intend the rulemaking requirement in section 302(j) [requiring sources to be identified in rulemaking for fugitive emissions to be included in the calculation of a major source] to apply to [major] modifications.” 49 Fed. Reg. 43211, 43213 (October 26, 1984). It concluded passages in the relevant House and conference reports that focus on the rulemaking requirement “refer only to major sources, and not to major modifications of these sources. Id (citing H.R. Report No. 95–294, 95th Cong., 1st Sess. 4, 9, 144 (1977); H.S. Rep. No. 95–564, 95th Cong., 1st Sess. 172 (1977).


Existing sources planning modifications may be affected by the 2022 Proposed Fugitive Emissions Rule, but, given the fact that the 2008 rule has been stayed since 2009, EPA expects the new rule to have a limited impact.

87 Fed. Reg. 62322 (October 14, 2022)