[Archived Alerts]

EPA Announces Changes (Improvements?) to the NSR Program

For more information, contact Jennifer Seinfeld at 410.312.7915.

After more than 10 years of attempting NSR reform, EPA announced on November 22, both final and proposed rules to the New Source Review (NSR) Program. (See Zephyr's assessment of the conceptual changes originally presented by EPA in June.) These changes are being touted by EPA as ways to 'remove unintended regulatory barriers to investments in energy efficiency and pollution control projects." However, environmental groups have soundly denounced the NSR changes, describing the rule changes as "weakening of the Clean Air Act," and "adding loopholes."

So which is it - an improvement or a relaxation to the NSR Program? Probably neither term describes the changes comprehensively or accurately. But, they are clearly not "simplifications," as evidenced by the nearly 1,000 pages of text published on EPA's NSR home page. (See http://www.epa.gov/nsr/)

Final Rule
The final rule was originally proposed in the Federal Register on July 23, 1996. In a nutshell, it affects the following areas:

  • Baseline emissions determination. To determine actual emissions, industrial facilities (not including electric utility steam generating units) are now allowed to use any 24-month period within the last decade, as long as current emissions limitations are taken into account.
  • Actual-to-future-actual emissions calculation methodology. To determine emissions resulting from a modification, facilities now have an option of using "projected actual" emissions, rather than "potential" emissions. Detailed record-keeping requirements are required to track emissions after the change, however.
  • Plantwide applicability limits (PALs). If a company agrees to operate its facility within strict site-wide emissions caps, called "PALs," then it is free to modify its operations without undergoing NSR. The site-wide cap must be based, however, on its actual, not allowable, emissions baseline.
  • Pollution control and prevention projects. If a facility installs a listed pollution control project (PCP), it is not required to undergo NSR, provided the PCP meets certain criteria, including a requirement that it causes no adverse air quality impacts.
  • Clean units. Units that have undergone a BACT or LAER analysis are deemed "Clean Units." Clean Units are allowed to make changes without triggering NSR, as long as changes in the emissions limitations or work practice requirements in the permit are not required.

Proposed Rule
The proposed rule attempts to define "routine maintenance, repair, and replacement" (RMRR), the highly controversial exclusion to the NSR definition of "major modification." As such, the proposed rule includes specific criteria and cost thresholds to determine whether activities can be considered "routine maintenance, repair, and replacement," and thus excluded from consideration as "major modifications." It is not yet known how much relief the proposed rule would actually provide to industry. The proposed rule sets out two categories of activities to be considered RMRR:

  • Annual maintenance repair and replacement allowance. This category would provide a facility-wide annual allowance for maintenance activities; and
  • Equipment replacement approach. This category would allow replacement of existing equipment with "functionally equivalent new equipment."

Both options include cost thresholds for determining applicability.

Absent from the proposed rule are two concepts included in EPA's preliminary (June of 2002) announcement of the anticipated NSR rulemaking. The first is "debottlenecking," a term used to describe affected units upstream and/or downstream of the emissions unit being modified. The other is "aggregation," a term used in determining how different projects at a single plant site should be viewed with respect to NSR applicability. The preamble to the proposed rule mentions that issues involving debottlenecked emissions units will be addressed in a forthcoming rulemaking.

As of November 26, neither the final nor the proposed rules have officially been published in the Federal Register, although publication is expected to be imminent. The final rule will become effective 60 days after publication. Comments on the proposed rule must be received within 60 days of its publication. Numerous comments, including opposition from environmental groups, as well as a public hearing are expected.

Zephyrcontinues to analyze the details and implications of the final and proposed rules. A more detailed analysis of the rule will be posted to Zephyr's web page in the coming weeks. If you have any questions, feel free to contact Jennifer Seinfeld at 410-312-7915 or jseinfeld@zephyrenv.com.

New Life for NSR Reform (from July 2002)

For more information, contact Lou Corio at 410.312.7912 or lcorio@zephyrenv.com.

In the latest chapter on reforming the New Source Review (NSR) program, the EPA submitted a report to President Bush in June, outlining recommendations for "improving" NSR. These reforms include moving forward to finalize NSR rule changes initially proposed in 1996 under the Clinton Administration and proposing some new changes to the rules.

The potential ramifications of these reforms for industry are generally positive. Projects meant to improve reliability and/or efficiency should be less apt to get bogged down in the lengthy and costly NSR permitting process. Sources switching to less-polluting fuels or installing certain pollution controls will not be subject to NSR (which was not always the case in the past).

Two key reforms newly proposed by EPA are a revision to the definition of "routine maintenance, repair, and replacement" (RMR&R) and a clarification of the definition of "debottlenecking:"

  • RMR Definition - The new RMR&R definition will reference cost-based thresholds using well-established precedents from the New Source Performance Standard (NSPS) regulations. These cost-based thresholds are set on an industry-by-industry basis, ranging from 1.5 to 15%. Projects whose aggregated costs are below the applicable threshold would automatically be given RMR&R treatment.
  • Debottlenecking Definition - The debottlenecking definition will clarify that, when calculating actual emissions associated with a physical change or change in the method of operation, sources generally should look only at the unit undergoing the change. Emissions from units "upstream" or "downstream" of the unit being changed should be considered only when the permitted emissions limit of the upstream or downstream unit would be exceeded or increased as a result of the change.

The revised RMR and debottlenecking definitions will need to go through new rulemaking and public comment processes before being finalized.

Four key elements of the 1996 recommendations to be finalized (which do not require new rulemaking or public comment) under the current reform movement are:

  • Plant-wide Applicability Limits (PALs) - A facility would be allowed to make changes without obtaining a major NSR permit, provided air pollutant emissions do not exceed a plant-wide cap. A PAL would be based on the facility's actual (not allowable) emissions baseline, determined according to the method discussed in the fourth bullet below. In general, a PAL would require more emissions monitoring to enforce.
  • Clean Unit Exclusion - An emissions unit would be considered "clean" and entitled to the exclusion if it underwent a review process that resulted in its achieving Federal Best Available Control Technology (BACT) or Lowest Achievable Emission Rate (LAER) control levels or comparable State minor source BACT since 1990. A clean unit would only trigger NSR if permitted allowable emissions increase. Sources that installed Maximum Achievable Control Technology (MACT) or Reasonably Available Control Technology (RACT) may also be eligible for the exclusion.
  • Pollution Control and Prevention Projects - The PSD and nonattainment NSR regulations would be revised to exclude from NSR projects that will result in a net overall reduction of air pollutants, regardless of the primary purpose of the project. For fuel switches (to a less-polluting fuel) and many pollution control projects, EPA will not require a demonstration that the change is environmentally beneficial prior to granting the exclusion. For pollution prevention projects, EPA will require a determination by the permitting authority that the project is environmentally beneficial for the project to qualify for the exclusion.
  • Calculating Emissions Increases and Establishing Actual Emissions Baseline - The methodology for calculating emission increases for a physical change or change in method of operation would compare representative pre-change actual emissions (or baseline emissions) with projected post-change actual emissions. For sources other than power plants, the actual emissions baseline would be the highest consecutive 24-month period within the preceding 10 years (the so-called "2-in-10 Rule"). This is a significant change from the long-standing "actual-to-potential" methodology.

EPA also will be clarifying its nonaggregation policy. Currently, when multiple projects are implemented in a short period of time, a difficult and complex analysis must be performed to determine if the projects should be treated separately or together (i.e., aggregated) under NSR. Under the reformed nonaggregation policy, a project would be considered separate and independent from any other project at a major source unless 1) the project is dependent upon another project to be economically or technically viable, or 2) the project is intentionally split from other projects to avoid NSR. The clarified nonaggregation policy will need to go through new rulemaking and public comment processes before being finalized.

EPA will issue regulatory changes to the NSR program in a rulemaking action later this year. State and local regulatory agencies will then need to adjust their regulations to reflect the NSR reforms. This State/local process will take, approximately, one additional year. Therefore, sources should not expect to see the NSR reform in effect until 2004. Stay tuned to this web site for future updates.