04.03.2023 EPA’s Big Plans for 2023: Top Air Rulemakings We Are Watching
An environmental lawyer walks into a cocktail party. An often-asked question is: What is happening at EPA in your world? What should we be watching that could impact business as usual? Any surprises this year? This article will make you cocktail party ready. Buckle up as we navigate through the top potentially impactful rules and sleepers we are tracking in the air world this year.
In early January, EPA projected an aggressive rulemaking agenda for 2023. EPA plans to promulgate a substantial number of Clean Air Act rules as part of its plans. Our watch-list is as follows:
- Reconsideration of the Particulate Matter (“PM”) National Ambient Air Quality Standard (“NAAQS”) (2023: Proposed / Final Rules expected): EPA recently released the proposed rule. EPA proposes to lower the existing PM 2.5 NAAQS Annual Standard from 12.0 ug/m3 (current) to either 9.0 ug/m3 or 10.0 ug/m3. EPA does not plan to modify the 24-hour primary or secondary PM 2.5 standard. EPA has printed maps of at-risk areas that may become nonattainment for the new standard. EPA also released a list of current ambient concentrations based on monitoring data. A lower PM 2.5 annual standard will impact all industry sectors. The comment period for the proposed rule ended on March 28, 2023. EPA projects the final rule to be released in August of this year.
Potential impacts: A lower PM NAAQS standard will impact economic development. A lower PM NAAQS will make it harder to “pass” ambient modeling, which is essential to pursue a project permit. Most new manufacturing facilities must undertake ambient modelling to obtain an air permit. Major facility expansions and projects will also require modeling if they trigger Prevention of Significant Deterioration (“PSD”) significance thresholds. New power generation assets will be more difficult to build and site, especially in urban areas that may have a larger power demand. Grid reliability may be impacted as fossil fuel-fired units retire; yet new generation is more difficult and time-consuming to build.
Good Neighbor Federal Implementation Plan (“FIP”) (2023: Final Rule released on March 15, 2023): The Final Rule addresses states’ compliance with the 2015 Ozone NAAQS of 70 ppb for the primary and secondary 8-hour standards. The Final Rule applies to 23 states to address their Good Neighbor obligations to eliminate significant contribution or interference with maintenance of the NAAQS in other states. The FIP applies to the power sector and many industrial manufacturing sector categories. The Final Rule uses the established Cross-State Air Pollution Rule (“CSAPR”) trading program for power plants in states subject to the rule. It provides for ozone season (May 1-September 30) NOx reductions from utility units beginning in 2023 and from certain industrial stationary sources by 2026. The proposed rule called for dramatic NOx reductions during the ozone season beginning in 2023. The Final Rule follows this trend. Utility units subject to the Rule must contend with substantial reductions in ozone season NOx allocations in 2026-2027, while certain industry sectors will have new NOx rates for certain units beginning in 2026. The Final Rule’s effective date will fall immediately prior to or during the ozone season for 2023. EPA indicates that it may later find that six more states (Arizona, Iowa, Kansas, New Mexico, Tennessee, and Wyoming) are significantly contributing to one or more nonattainment or maintenance receptors. EPA also identifies a future discretionary proposal for adding an auction mechanism to the Group 3 CSAPR trading program. EPA indicates that the auction would increase market liquidity but would also include changes to maintain program stringency.
Potential impacts: The Good Neighbor FIP requires lower NOx rates during the ozone season across many industries and states. The Final Rule calls for stringent ozone season rates for the power sector commensurate with emission rates for units that have installed state-of-the-art NOx controls for coal-fired and gas-fired units. The program adds new concepts, not previously used for prior ozone transport rules, to tighten allowable NOx emissions. Industry sectors are pulled into the rule for the first time. EPA agreed to some concessions in the Final Rule in response to comments, although the Final Rule is still set to achieve significant NOx reductions for both power and industry sectors. EPA opted not to include a reliability “safety valve” to provide utilities with a compliance solution in a must-run situation to maintain the power grid. The Final Rule is likely to be challenged in the United States Court of Appeals for the District of Columbia Circuit. The Final Rule is complex, providing a myriad of areas for potential challenge. Litigation would add a layer of compliance uncertainty, unless the Court grants a stay of the compliance dates in the Rule.
- Section 111(b) and Section 111(d) Greenhouse Gas Rules (2023: Proposed Rule expected): The Section 111(b) rule will regulate greenhouse gases from new or modified fossil fuel generators, while the Section 111(d) rule will establish greenhouse gas emission guidelines for fossil fuel-fired units that are currently in operation. The Section 111(b) rule will amend the New Source Performance Standards (“NSPS”) for greenhouse gases based on a comprehensive review of the NSPS, portions of which were never finalized. The Section 111(d) rule is the replacement rule for the defunct Clean Power Plan and the Affordable Clean Energy rule. The proposed rules are scheduled for release this spring and are presently undergoing review at the Office of Management and Budget.
Potential impacts: These rules directly impact the power sector. The use of carbon capture and other carbon-reduction technologies is a topic of debate. The universal feasibility of these technologies for new and existing units is disputed. Without a reliable control device for greenhouse gas emissions, reductions can only be achieved by programs that reduce unit runtime, such as trading programs. If capacity factors for existing fossil units are reduced, that generation must be replaced. All industries and ratepayers will likely face increased electricity costs to finance new generation. While the power sector is in transition, grid reliability is a perennial concern of regional transmission organizations. Reliable electricity is important to all industries and citizens.
The 2023 Sleeper to watch:
- Section 111(d) Implementation Rule (2023: Proposed / Final Rules expected): The implementation rule changes the requirements for how Section 111(d) rules for existing sources are implemented. All future Section 111(d) rules will follow these rules. Although the rule masquerades as a procedural rule, EPA’s December proposal presents new elements that are likely to affect the outcome of these important rulemakings. EPA proposes new requirements that states must undertake and put in their implementation plans, such as meaningful public engagement and source-specific requirements if “remaining useful life” and “other factors” are invoked. The proposal shortens states’ time frames to submit state plans yet adds more state development and plan requirements and heightens the standard necessary for plan approval. If states cannot submit an approval plan in time, then EPA can submit a federal plan, essentially subsuming states’ roles in the Section 111(d) implementation process. EPA expects to finalize the rule in spring 2023.
Potential impacts: The implementation rule will impact all future Section 111(d) rules for all sectors. Presently, EPA is using Section 111(d) to carry out its greenhouse gas agenda. EPA has proposed Section 111(d) greenhouse gas rules for the oil and gas sector. Power sector greenhouse gas rules are next on EPA’s agenda. Other Section 111(d) rules may affect other sectors in the future. If the implementation rule is finalized as proposed, the Section 111(d) cooperative federalism process is in jeopardy. In addition, sources with unique circumstances will be less likely to have the opportunity to use “remaining useful life” and “other factors” to demonstrate that a less stringent emissions guideline should be applied on a source-specific basis.
Reconsideration of the National Ambient Air Quality Standards for Particulate Matter, 88 Fed. Reg. 5558 (Jan. 27, 2023) (PM NAAQS Reconsideration)
Proposed Rule, Federal Implementation Plan Addressing Regional Ozone Transport for the 2015 Ozone National Ambient Air Quality Standard, 87 Fed. Reg. 20036 (Apr. 6, 2022)
Amendments to the NSPS for GHG Emissions From New, Modified & Reconstructed Stationary Sources: EGUs in the Fall Unified Agenda, RIN 2060-AV09
Emission Guidelines for Greenhouse Gas Emissions From Fossil Fuel-Fired Existing Electric Generating Units in the Fall Unified Agenda, RIN 2060-AV10
Adoption and Submittal of State Plans for Designated Facilities: Implementing Regulations Under Clean Air Act Section 111(d), 87 Fed. Reg. 79176 (Dec. 23, 2022)
Standards of Performance for New, Reconstructed, and Modified Sources and Emissions Guidelines for Existing Sources: Oil and Natural Gas Sector Climate Review, 87 Fed. Reg. 74702 (Dec. 6, 2022)