EPA Takes Final Action on Project Aggregation Policy Under Clean Air Act

The New Source Review (NSR) program hinges on whether physical or operational changes are a “modification” at a source.  A modification may include a single change or multiple changes to the facility as part of a single project.  An emissions analysis for NSR purposes considers emissions impacts from all the changes involved in the project.  As a result, how a source delineates a project has a significant impact on NSR permitting.

EPA recently took final action that clarified the agency’s position on defining how related physical or operational changes are treated for NSR (the “Final Action”).  The Final Action also concluded the reconsideration of a related EPA action from 2009 on NSR aggregation.  EPA reviewed public comments on that action and decided to retain the interpretation in that 2009 action without making any changes to the NSR rule itself.

The Final Action affirms EPA’s “substantially related” test as a standard for project aggregation for NSR.  EPA is quick to note that project aggregation determinations are fact-specific, making it impossible to establish a bright line standard.  EPA also remarks that the Final Action does not depart from past guidance but merely supplements prior policies.  It says that providing clarity on project aggregation in a single document is valuable because navigating EPA’s collection of guidance documents on the topic “has been a challenge for sources and permitting authorities over the years.” 83 Fed. Reg. at 57330.

Timing of activities is a consideration in whether projects are “substantially related.”  As a policy matter, EPA set a presumption that activities that are three or more years apart are not “substantially related.”  Other relevant factors include: (1) dependency of the activities on each other for viability; (2) joint project planning; and (3) functional interconnectedness of components in the project.  EPA emphasized that the term “intrinsic relationship,” which has been used in past memoranda, is meant to be a synonym for “substantially related.” Id. at 57331.  EPA explained in the Final Action that EPA interprets the NSR regulations to allow a source to reasonably define “its proposed project broadly.”  Id. at 57331.

As a final note, EPA opened the door for states to formally adopt the policy in the Final Action through a SIP submittal that EPA would approve.  EPA noted that states do not need to avail themselves of this route to implement the “substantially related” test.  EPA believes that many states already follow a similar interpretation.  Id. at 57331.

Sources should be mindful of the components of the “substantially related” test, given that defining the project begins with the source.  If a source wishes for multiple activities to be considered as a single project, the manner in which the project develops will impact the regulatory agency’s interpretation.  In other words, (i) development of common engineering and budgeting analyses for multiple project activities, and (ii) a time line for construction and installation within the three-year period during which activities are presumed not to be substantially related will help the source successfully draw the boundaries of the project for NSR purposes.

Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NNSR): Aggregation; Reconsideration, 83 Fed. Reg. 57324 (Nov. 15, 2018).

Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR): Aggregation and Project Netting, 74 Fed. Reg. 2376 (Jan. 15, 2009).