In March 2018, former U.S. Environmental Protection Agency (EPA) Administrator, Scott Pruitt, issued a guidance memorandum titled “Project Emissions Accounting Under the New Source Review Preconstruction Permitting Program.” Administrator Pruitt explained in the memorandum that the agency interprets the current New Source Review (NSR) regulations to allow emissions decreases, as well as increases, to be considered at Step 1 of the NSR applicability process provided the decreases and increases are part of a single project. Emissions decreases associated with a project, previously could not be accounted for until Step 2 of the NSR applicability process. Furthermore, Administrator Pruitt explained that the prior Step 1 term “project netting” has caused confusion with permitting authorities, and within the EPA itself and that “project emissions accounting” is a more accurate description of what should take place under Step 1.

Although the existing language in the NSR regulations supports the March 2018 Memorandum interpretation, the EPA proposed the “Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NNSR): Project Emissions Accounting” Rule on August 9, 2019 to provide clarity and eliminate uncertainty. In this action, EPA is proposing revisions to the applicability provisions in the NSR regulations to fully clarify that the regulatory language of 40 CFR 52.21(a)(2)(iv)(f) allows the approach set forth in the March 2018 Memorandum. More specifically, EPA is proposing to revise the regulatory language for projects that involve multiple types of emissions units. The proposed language more directly states that both emissions increases and decreases are to be considered as part of Step 1 of the major modification applicability test in the same manner as they are for projects that involve only existing emissions units and projects that involve only new emissions units. This action is also proposing to replace and withdraw EPA's 2006 Project Netting Proposal.

Additionally, in the proposed rule, the agency specifically requests:

  • Public comment on EPA's position on NSR circumvention by “over aggregation” (i.e., separate activities that, when considered together, either decrease emissions or result in an increase that is not significant). EPA believes that taking account of emissions decreases at Step 1 does not present any reasonable concerns regarding NSR circumvention.
  • Public comment on, if, in order for an emissions decrease to be accounted for at Step 1, it would be reasonable to require that a source owner or operator determine whether the activity (or activities) to which the emissions decrease is projected to occur is ''substantially related'' to another activity (or activities) to which an emissions increase is projected to occur. EPA is particularly interested in the impacts that this alternative approach might have on sources' decisions to undertake activities projected to result in emissions decreases (e.g., whether such decisions might be delayed or otherwise foregone).
  • Public comment on whether the 40 CFR 52.21(r)(6) provisions provide appropriate monitoring, recordkeeping, and reporting requirements for both emissions decreases and increases, as relevant, in the context of Step 1 of the major modification applicability test.
  • Public comment on whether states would need to modify their State Implementation Plans (SIPs) to accommodate this rule's clarifications, if the rule revisions become final. Reviewing authorities may not need to revise their state regulations and submit SIP revisions to adopt those revisions, if the current applicability procedures in those regulations can be interpreted to allow for project emissions accounting, or these state and local programs incorporate the federal NSR regulations by reference without a date restriction.
  • Examples on the emissions and cost impacts of project emissions accounting, including any decision-making records made by companies that indicate whether a project was or was not undertaken due to the availability of project emissions accounting. These examples could be beneficial for EPA to potentially provide some level of qualitative analysis when finalizing this proposed rule.

Comments on the proposed rule must be received on or before October 8, 2019. All comments should be identified by Docket ID No. EPA-HQ-OAR-2018-0048 and submitted to the Federal e-rulemaking portal. Follow the online instructions for submitting comments.

If you have any questions regarding the August 2019 Proposed Rule or the March 2018 Memorandum, please contact Trinity Consultants at 1 (800) 229-6655.