Coal, Emissions, Policy & Regulation

NSR Developments: EPA Returns Its Own Serve

Issue 3 and Volume 122.

THE AWARD for the EPA regulation with the best intentions but the poorest execution goes to the New Source Review (NSR) program. Its vague and imprecise language (such as not defining “routine”) has left the rule subject to political whims.

The Bush EPA attempted to reform the rule in 2002 with common-sense changes (such as pollution control projects) only to have many of those modifications undone by the Obama EPA. One reform which did stick is the ability to conduct post-project emissions calculations by comparing to future projected actual emissions instead of future potential emissions. The benefit is that projected actual emissions will be lower than future potential emissions, therefore making it easier to avoid trigging NSR permitting.

The Trump EPA continues this seesaw by again addressing how to calculate if a modification’s emissions exceed the NSR permit thresholds. However, instead of “reforming” NSR, the current EPA administration seeks to “streamline” the regulation.

On December 7, 2017, EPA Administrator Pruitt issued a guidance memo on NSR for conducting the actual-to-projected-actual applicability test. This memo specifically responds to recent court rulings for DTE Energy Company. The DTE case stems from a 2010 overhaul project at the Monroe coal-fired power plant. Initially, DTE characterized the project as exempt from NSR permitting due to the exemptions for routine maintenance and demand growth. However, EPA initiated an enforcement action arguing that DTE’s emission projections were erroneous. After two trips to the 6th Circuit Court, the rulings determined that EPA could enforce against a company if EPA determined that the company’s predictions of post project emissions were erroneous even when the actual post project emissions did not show an increase above the NSR thresholds.

“The Bush EPA attempted to reform the rule in 2002… only to have many of those modifications undone by the Obama EPA.”

Administrator Pruitt’s 2017 memo makes much of the DTE lawsuits moot by changing EPA’s position on when enforcement actions will occur. Although this memo is “not a rule or regulation,” “does not change or substitute for any law, regulation,” and “is not legally enforceable,” it still provides useful clarification on a confusing, but important, permitting topic. Basically, there are no major changes to the current netting procedure itself, just in the post-analysis scrutiny.

Administrator Pruitt’s memo states that EPA will use its “enforcement discretion” to not second-guess a facility’s pre-project NSR applicability test nor will EPA consider a violation to have occurred unless there is an actual increase in emissions post-project that exceeds the NSR major project thresholds. However, note the following details:

  • The facility must perform a pre-project NSR applicability analysis using the calculation procedures in the regulations. An analysis done after-the-fact loses some, if not all, protection. Additionally, check state regulations for any minor source permits that may be required. Coordination and/or communication with state regulators may be required.
  • The facility must follow the applicable recordkeeping and notification requirements. Depending on if the net increase is below 50% of the NSR threshold or if it is between 50-100% of the NSR threshold, reports may need to be submitted to the state agency to fulfill the “reasonable possibility” requirements. Reports sent to the state agency would then be open to public scrutiny.
  • This memo pertains where applicable state regulations are not stricter than this Federal guidance. For example, Missouri has a law that state regulations cannot be more strict than Federal laws, but California obviously does not.
  • The facility is allowed to actively manage post-project emissions to avoid exceeding the NSR major project thresholds. This is a significant philosophical evolution. Given that the window for determining if post-project emissions exceed the NSR thresholds is five years, explicit guidance that EPA will allow active management of future emissions by reducing operation during this critical period opens up options for avoiding NSR permitting but incurring the ire of intervenor groups.
  • No permitting action is necessary to make the future projected emissions enforceable.

Following the logic of not second-guessing industry, the Trump EPA may soon decide to apply the same principle to the Best Available Control Technology (BACT) requirements of the NSR program. However, lawsuits tend to span more than the four years between presidential elections. The wise power plant will actively monitor emissions and document each outage with the advice and confidential protection of counsel.